UNIVERSITY  OF  CALIFORNIA 
AT   LOS  ANGELES 


GIFT  OF 

CARNEGIE   ENDOWMENT 


Publications  of  the 

Carnegie  Endowment  for  International  Peace 

Division  of  Economics  and  History 
John  Bates  Clark,  Director 


JAPANESE  MONOGRAPHS 

EDITED    BY 

BARON  Y.  SAKATANI,  D.CL. 

Formerly  Minister  of  Finance  of  Japan 

Conscription  System  in  Japan,  by  Gotaro  Ogawa. 
Expenditures  of  the  Russo-Japanese  War,  by  Gotaro  Ogawa. 
Military  Industries  of  Japan,  by  Ushisaburo  Kobayashi. 
War  and  Armament  Loans  of  Japan,  by  Ushisaburo  Kobayashi. 
War  and  Armament  Taxes  of  Japan,  by  Ushisaburo  Kobayashi. 
Expenditures  of  the  Sino-Japanese  War,  by  Giichi  Ono. 
War  and  Armament  Expenditures  of  Japan,  by  Giichi  Ono. 


EXPENDITURES  OF  THE 
SINO-JAPANESE  WAR 


BY 

GIICHI  0N0 

Councilor  of  Finance  Department 


NEW  YORK 

OXFORD  UNIVERSITY  PRESS 

AMERICAN   BRANCH:  35  W«si  :i:'sn  sireet 
LONDON,   TORONTO,    MI-LB.  n  KM-    AM)   BOMBAY 

1922 


COPYRIGHT    1922 

BY    THE 

CARNEGIE    ENDOWMENT    FOR    INTERNATIONAL    PEACE 


PRINTED    IN    THE    UNITED   STATES   OF   AMERICA 
AT    THE    RVMFORl)    PRESS,   CONCORD,    N.   H. 


NOTE   BY  THE   DIRECTOR 

The  plans  of  the  Division  of  Economics  and  History  of  the 
Carnegie  Endowment  for  International  Peace  have  been 
transformed  by  the  World  War.  Problems  now  calling  for 
study  transcend  in  importance  those  with  which  this  Division 
has  been  dealing  and  material  for  research  and  record  so  far 
transcends  any  that  was  formerly  available  that  it  will  demand 
^  almost  exclusive  attention  for  some  years  to  come.  A  new 
*£  world  has  evolved  suddenly  out  of  the  world  which  we  knew 
and  the  transformation  extends  to  the  foundations  of  gov- 
ernment and  of  economic  life. 

<M 

^         The  process  of  warfare  itself  is  now  so  unlike  that  of  former 

9j=     days  that  many  military  rules  of  the  past  have  gone  into  the 

scrap  basket.     The  late  war  ended  when  its  deadliest  tools 

had   barely   been   brought   into   action.     The   peoples   have 

fought  as  they  had  worked,  by  machinery,  mechanical  and 

lo  chemical  engines  of  destruction  have  decided  the  result  and 

S3  will  decide  in  like  manner  the  result  of  all  wars  of  the  future. 

Machine   shops   and   chemical    laboratories    will    so    largely 

determine  what  armies  shall  win  that  fighting  strength  will 

<  be  as  much  a  matter  of  available  capital  and  of  science  in 

applying  it  as  of  numbers  of  troops  and  strategy  in  directing 

£them.     It  is  safe  to  say  that  the  death  dealing  arts  and  instru- 

z  Tments  will  far  surpass  in  destructiveness  those  which  made 

.  the  late  war  so  deadly,  and  to  a  soldier  of  the  future  the  order 

g  pto  march  into  a  cloud  of  poisonous  gas  and  a  whirlwind  of 

S     missiles  will  resemble  an  order  to  plunge  into  tin-  rapids  of 

^     Niagara.     This  is  one  central  and  obvious  fact  which   the 

•^      war  has  taught  us  and  it  has  many  corollaries,  sonic  of  which 

2     have  to  do  with  the  increased  costs  of  war  an<  1  t  he  importance 

of  the  particular  resources  that  make  a  nation  powerful  for 

offense  and  defense;  but  there  are  less  conspicuous  economic 

facts  which  are  more  fundamental,  since  they  may  determine 

where  and  when,  if  at  all,  wars  shall  hereafter  occur. 

Causes  of  warfare  are  always  partly  economic  and  those 
which  incited  the  recent  one  were  mainly  so.  The  business 
plans  of  a  powerful  state  reached  to  the  ends  of  the  earth 

v 


L5J/»J(SH 


N1  NOTE   Bl     mi-   DIRE(  TOR 

;ul,i  ,  ,|  and  interlaced  the  claims  of  other  states  that 

Borne  w  riters,  then  and  afterwards,  pronounced  the  war  inevi- 
table. It  we  a— imic  a  settled  purpose  on  the  part  of  such  a 
state  to  encroach  on  the  rights  of  others,  we  may  say  that  it 
doubtless  was  inevitable.  The  victory  of  the  defending 
countries  has  saved  them  from  an  immediate  and  intolerable 
domination,  but  it  can  not  be  taken  as  an  assured  fact  that 
similar  attempts  will  never  again  be  made.  The  economic 
inducement  continues  and  the  means  may  at  some  time  be 
forthcoming. 

Within  the  several  states  war  has  democratized  industry, 
gi>  ing  to  labor  an  increase  of  control — a  change  that  if  con- 
tinued will  entail  momentous  consequences;  but  still  greater 
effects  have  been  produced  on  the  relations  of  states  to  each 
other.  The  world  as  a  whole  has  changed  more  than  its 
component  parts  and  the  new  relation  of  the  parts  to  one 
another  is  the  critical  element  in  the  situation.  The  great 
increase  in  the  economic  functions  of  governments  is  one 
cause  of  this  condition.  Within  the  great  international  com- 
munity in  which  the  several  states  are  units  extensive  eco- 
nomic functions  have  gravitated  into  the  hands  of  govern- 
ments and  caused  them  to  face  each  other  as  business  rivals 
and  to  deal  with  each  other  in  a  multitude  of  ways  in  which 
the  merely  self-seeking  policy  of  private  business  is  intoler- 
al  >Ie.  Power  to  invoke  principles  of  justice  and  international 
law  as  interpreted  by  a  competent  court  has  become  an  in- 
dispensable means  of  allaying  strife  and  this  fact  exalts  to 
supreme  importance  the  high  court  of  nations  which  has  just 
been  established.  It  magnifies  also  the  importance  of  the 
nomic  facts  and  principles  with  wmich  the  law  itself  will 
have  to  deal.  It  is  not  merely  individual  men  or  private 
corporations  who  now  meet  each  other  in  the  rough  and 
tumble  of  a  world-wide  mart  but  states  themselves,  each 
representing  its  own  population  and  seeking  to  foster  its 
interests  as  a  zealous  and  faithful  agent.  The  chances  of 
friction  that  are  inherent  in  ordinary  commerce  inhere  today 
in  vast  international  transactions  and  will  increase  in  the 
measure  in  which  the  intercourse  grows.     All  this  means  a 


NOTE    BY    THE   DIRECTOR  vii 

great  increase  in  incentives  to  warfare,  on  the  one  hand,  and 
in  the  motives  for  preventing  it,  on  the  other.  Private  com- 
merce unites  more  than  it  separates  those  who  participate  in 
it,  and  it  remains  to  be  seen  whether  international  commerce 
will  act  in  the  same  way;  but,  in  view  of  what  modern  war 
means,  the  human  race  will  deserve  to  perish,  and  much  of 
it  will  probably  do  so,  if  the  forces  of  strife  are  allowed  to  get 
the  upper  hand.  Whether  they  will  or  not — whether  the 
recent  economic  changes  will  tend  to  reduce  warfare  or  to 
increase  it — depends  on  the  ability  of  nations  to  create  and 
maintain  the  instrumentalities  that  in  the  new  state  of  the 
world  are  necessary. 

Certain  it  is  that  the  feeling  which  prevails  today,  the 
world  over,  is  not  one  of  security.  The  dread  of  further  war 
is  greater  than  it  was  before  1914.  In  some  areas  war  still 
prevails,  in  others  peace  is  held  by  a  precarious  tenure  and 
in  all  it  can  be  firmly  established  only  by  conscious  and  intel- 
ligent action  by  the  states  themselves.  Mere  exhaustion 
holds  war  dogs  temporarily  in  leash,  but  it  will  take  more 
than  that  to  tame  them  as  they  must  be  tamed  if  peace  is 
to  endure. 

We  here  confront  a  wide  difference  between  the  several 
states  in  comparative  desire  for  peace  and  disposition  to 
maintain  it.  One  portentous  fact  is  the  grim  determination 
of  Russian  communists  to  extend  their  system  by  crude  force 
from  state  to  state.  Bolshevism  is  government  1  >y  t  he  few  and 
largely  the  bad  masquerading  as  government  for  and  by  the 
people.  In  its  mother  country,  Russia,  the  economic  meas- 
ure by  which  it  began  its  career  was  confiscation  of  private 
wealth — in  itself  an  ultra-democratic  measure.  If  this  had 
brought  in  a  true  communism,  it  would  have  been  a  ruthless 
and  unjust  measure  for  creating  a  peace-loving  state.  A 
just  and  orderly  democratizing  of  industry  in  tin-  several 
states  would  give  new  strength  to  the  forces  of  peace,  and  it 
would  be  highly  improbable  that  any  state  so  influenced  would 
try  to  extend  its  system  over  foreign  countries  by  military 
invasion.  Democracy,  socialism,  communism  and  bolshe- 
vism  all  appear  in  the  aftermath  of  the  war.     The  first  of 


viii  NOTF.    BY   THE   DIRECTOR 

them  makes  i<*  future  peace  and  so  does  even  the  conserva- 
tive element  in  the  second,  while  all  else  in  the  series  means 
certainty  of  en  il  strife  and  danger  of  international  war. 

The  fad  thai  during  the  war  governments  had  to  take  on 
innumerable  functions  that  were  formerly  in  private  hands 
has  Lent  an  impetus  to  socialism  and  to  the  perverted  growths 
that  have  accompanied  it,  and  it  has  created  a  new  inter- 
ii.iii.Mi.il  system  the  meaning  of  which  is  profoundly  signif- 
icant, though  he  who  runs  can  not  so  easily  read  it.  There 
.ne  dangerous  features  in  the  system  which  the  war  evoked 
and,  happily  for  mankind,  there  are  available  safeguards 
which  were  evoked  with  them  and  need  to  be  retained  if 
human  effort  can  do  it. 

I  >v  a  c<  >mpulsi<  >n  that  there  was  no  resisting,  the  war  forced 
the  nations  of  the  Entente  into  economic  cooperation  with 
each  other.  Commissions  centering  finally  in  the  Supreme 
Economic  Council  adjusted  in  a  harmonious  way  questions 
that  would  otherwise  have  led  to  rivalry  and  conflicting 
action  in  purchasing  war  materials,  securing  ships,  appor- 
tioning food,  controlling  railroads,  financing  the  war  and 
doing  a  multitude  of  other  things  Avith  the  one  common  pur- 
pose of  victory.  The  special  compulsion  of  the  struggle  is 
over,  but  it  has  left  an  aftermath  of  issues  grave  enough  to 
make  peace  insecure  unless  something  equivalent  to  the 
Supreme  Economic  Council  survives  in  full  efficiency.  The 
agency  that  did  so  much  to  win  the  wrar  can  do  so  much  to 
prevent  another  one,  but  to  that  end  it  will  have  to  be  guided 
by  economic  principles  and  it  is  a  saving  fact  that  these  still 
survive.  The  war  has  not  abolished  the  law  of  demand  and 
supply,  though  governments  may  forget  it.  In  the  coming 
era  they  must  build  better  than  they  now  know.  Economic 
knowledge  must  either  go  in  advance  of  action  and  prevent 
disaster  or  follow  action  and  be  learned  from  disaster.  Be- 
yond computation  is  the  importance  of  attaining  the  knowl- 
edge and  using  it  when  evil  impends  and  prevention  is  possible. 

John  Bates  Clark, 
New  York,  Director. 

September  2?,  IQ20. 


AUTHOR'S   PREFACE 

When  Japan  emerged  from  the  old  regime  and  instituted  the 
present  system  of  government  at  the  time  of  the  restoration  of 
the  governmental  power  to  the  Emperor,  she  was  beset  with 
many  troubles  both  from  within  and  without  and  the  future 
destiny  of  the  Empire  seemed  hanging  in  the  balance.  Yet, 
within  no  more  than  half  a  century,  extraordinary  changes 
have  taken  place  and  Japan  has  today  become  one  of  the  great 
Powers,  having  developed  her  present  state  of  national  power 
and  prosperity  in  that  short  period.  Such  a  record  is  hardly 
paralleled  in  any  other  country.  Japan's  history,  therefore, 
during  the  fifty  years  of  the  Meiji  Era,  has,  it  is  needless  to  say, 
a  unique  place  in  the  history  of  the  world,  while  the  Sino- 
Japanese  War,  which  is  treated  in  this  book,  has  likewise  an 
especially  important  position  in  this  period  of  Japan's  history. 
There  are  two  reasons  for  assigning  to  it  such  special  impor- 
tance: one  is  the  effect  of  that  war  upon  Japan;  the  other  is  its 
special  effect  upon  China  and  the  various  foreign  countries 
which  had  interests  in  the  Far  East.  I  shall,  for  the  sake  of 
convenience,  call  the  former  the  internal,  and  the  latter 
external,  effect. 

The  Sino-Japanese  War  was  the  first  international  war  in 
which  Japan  had  engaged  since  the  restoration  of  Meiji.  At 
first  the  people  generally  did  not  believe  in  the  possibility  of 
final  victory,  but  fortunately  for  them  the  laurels  were 
awarded  to  Japan  at  last.  The  nation  then,  tor  the  first  time, 
realized  the  latent  power  which  she  had  been  conserving  since 
the  restoration,  and  henceforth  Japanism  as  opposed  to  the 
Europeanism  of  the  ante-bellum  period  has  been  encouraged, 
and  the  nation  has  constantly  planned  for  the  <lr\  el<  ipment  of 
this  national  power  to  the  fullest  extent.  Now  this  new 
national  consciousness  may  be  considered  as  the  internal  effeel 
of  the  war.  At  once  Japan  made  remarkable  progress  in  all 
directions.     The  enlightened  measures  adopted,  together  with 


x  PREI  \i  I 

the  resulting  economic  development,  furnish  materials  for  a 
\  aluable  discussion  of  the  effects  of  the  war  and  for  an  authen- 
tic history  of  the  nation's  developmenl  in  modern  limes.  As 
for  the  external  effed  of  the  Sino-Japanese  War,  it  had  a 
special  significance,  in  its  exposure  of  the  weakness  of  China. 
The  loosening  of  the  national  bond  of  unity  of  China  had  long 
been  foreseen  by  intelligent  observers;  but  the  Sino-Japanese 
War  clearly  showed  the  accomplished  fact  to  the  world. 
Consequently,  both  Furope  and  America,  who  have  for  many 
years  kept  watchful  eyes  upon  enterprises  in  the  Far  East, 
realized  that  their  opportunity  was  at  hand.  They  vied  with 
eai  h  other  in  efforts  to  secure  concessions,  so  that  Far  Eastern 
affairs  assumed  special  importance  in  reference  to  the  world's 
political  and  economic  questions.  All  this  was  a  result  of  the 
Sino-Japanese  War. 

Such  were  the  internal  and  external  effects  of  this  war.  As 
f<  >r  the  economic  effects,  they  too  have  been  very  great.  They 
have  completely  changed  the  economic  relations  of  the  Far 
East.  Consequently,  a  discussion  of  that  war  in  its  relation 
to  Japan  and  especially  to  the  economic  conditions  of  the  Far 
East  will  help  greatly  in  making  clear  how  the  new  situation  in 
the  Orient  has  been  brought  about.  The  value  of  such  dis- 
cussion is  immeasurable.  While,  to  be  sure,  this  book  does 
not  go  so  far  as  to  treat  of  the  external  effects  of  the  war,  yet, 
even  as  a  discussion  of  the  internal  effects  alone,  the  work 
forms  a  valuable  history  of  the  economic  development  of 
Japan.  From  this  point  of  view-  it  may  be  seen  how  important 
the  Sino-Japanese  War  was  in  the  economic  development  of 
Japan. 

The  author  of  this  work,  Mr.  Keiichi  Asada,  has  long  served 
in  the  Department  of  Finance,  where  he  has  been  actively  en- 

ged  in  work  relating  to  money  circulation  and  finance. 
The  t luu res  which  are  assumed  as  basis  of  the  arguments  in 
this  book  were  obtained  after  careful  investigation  and  are 
trustworthy  in  the  highest  degree.  Today,  any  one  who 
wants  to  make  investigations  of  the  same  kind  must  depend 
upon  the  materials  in  the  possession  of  the  Department  of 


PREFACE  XI 

Finance.  The  author  has  made  good  use  of  these  materials. 
And  there  is  only  one  thing  to  regret.  That  is,  that,  on 
account  of  the  limited  scope  of  the  present  treatise,  the  author 
could  not  adduce  additional  figures  in  proof  of  his  arguments. 
However,  he  has  not  failed  to  grasp  the  general  principles 
underlying  those  figures,  and  to  this  fact  the  present  editor, 
in  his  concluding  remarks,  desires  cordially  to  attest. 

Giichi  Ono. 
Tokyo,  Japan, 
May,  igi6. 


BIBLIOGRAPHY 

Asada  Ki  ii<  in,  Treatise  on  the  Fluctuation  in  Prices  of  Commodi- 
ties  in  Japan  sine-  the  Meiji  Restoration,  and  the  Cause  thereof 
I  Meijilshin  igo  ni  okeru  Wagakuni Bukka  no  Hendo  oyobi  Sono 
den  in  ron)  1912. 

Ci  rrj  N(  v  System  Investigating  Committee,  Report  and  Supple- 
ments (Kahei  seido  Chosakai  Hokoku  oyobi  do  Furoku),  1895. 

Department  of  Finance: 

References   for   Monetary   Circulation    (Kinyu  jiko   Sankosho), 

1899-1910. 
Reporl  of  Financial  Readjustment  after  the  Sino-Japanese  War 

{Xijit  shichi  hachinen  eki  Sengo  Zaiseishimatsu  Hokoku),  1900. 
Comparative  Table  of  Figures  for  Forty-one  Years  relating  to 

Foreign   Trade  of  Japan    (Dainihon   Gaikoku  Boeki   Shijii 

ichinen  Taishohyo),  1909. 
Animal  Reports  on  Foreign  Trade  of  Japan  (Dainihon  Gaikoku 

Boeki  Nenpo),  1 882-1910. 
Annual  Reports  of  the  Department  of  Finance  (Okurasho  Nenpo), 

1875-1911. 
Annual  Statistical  Reports  of  the  Bureau  of  Taxation  (Shuzei- 

kyoku  Tokei  Nenpo),  1885-19 10. 

General  Staff  of  Japan,  History  of  the  Sino-Japanese  War 
(Nisshin  Senshi),  1904- 1907. 

[NABA,  Kin/ax,  Complete  History  of  the  Ching  Dynasty  (Shin  did 
Zenshi),  191 4. 

KOBAYASHI,  Ushisaburo,  Treatise  of  x^djustment  of  Finance 
(Zaisci  Sciri  Ron),  1912. 

Oriix  i  \l  Kconomics  Publishing  Co.,  Finance  and  Economy  after 
the  Sino-Japanese  War  (Niju  shichi  hachinen  Sengo  no  Zaisei 
oyobi  Kcizni),  1 903. 

Sakatani,  Y.  (representing  the  authors),  History  of  Finance  of  the 
Meiji  Era  (Meiji  Zaiseishi),  1904. 

Statistics  Bureau  of  the  Cabinet,  Annual  Statistical  Reports  of 
the  Japanese  Empire,  Xos.  1-34  (Nikon  teikoku  Tokei  Nenkan), 
1882    1911. 

Taki/.wy  \,  NAOSHICHI,  Treatise  on  History  of  Japanese  Money  Cir- 
culation [Nippon  Kinyu  Skiron),  1912. 

YOSHIDA,   Togo,   History  of  Ancient  Japanese-Korean  Relations 
(Nikkan  Koshi  dan),  191 1. 
xii 


EXPLANATORY  TABLES 


Value  of  Japanese  Currencies 

Japan  adopted  the  gold  standard  system  in  1871,  but  the  inconvertible  paper 
money  became  principal  currency  a  few  years  later.  In  1886  the  paper  money 
became  convertible  into  silver  and  after  that  date  the  Japanese  currency  system 
was  the  silver  standard  de  facto,  until  on  October  1 ,  1897,  the  gold  standard  system 
was  legally  adopted.  The  figures  necessary  to  ascertain  the  value  of  Japanese 
currencies  are  given  below: 

(1)  1  gold  yen  (according  to  Coinage  Law  of  187 1)  contains  1.5  gramme  pure  gold. 

(2)  1  gold  yen  (according  to  Coinage  Law  of  1897)  contains  0.75  gramme  pure  gold. 

(3)  1  silver  yen  contains  24.261  gramme  pure  silver. 

(4)  The  value  of  I  silver  yen  in  the  English  currency  (according  to  the  demand 

rate  of  exchange  on  London  in  the  average  of  the  year)  is  as  follows: 


1874. 

1875- 
1876. 
1877. 
1878. 

1879. 
1880. 
1881. 


s.  d. 

4.02.0 

1882 

4.00.8 

1883 

3. II. 2 

1884 

3"-7 

1885 

3  °9-4 

1886 

3.08.0 

1887 

3.08.9 

1888 

3.08.4 

1889 

s. 

d. 

3.08.8 

1890 

3 

07.9 

1891 

3 

07.9 

1892 

3 

06.0 

1893 

3 

03.2 

1894 

3 

02.0 

1895 

3 

01 .0 

1896 

3 

01 .1 

1897 

d 
04 


s. 

3 

2.02. 
2. 10. 

.06. 

.01 

.01 

.02.0 

.00.4 


(5)  The  value  of  1  yen  of  paper  money  in  the  English  currency  (calculated  on  the 
basis  of  the  above  mentioned  exchange  rate  and  the  quotations  of  the  silver 
price  in  the  Tokyo  Exchange  in  the  average  of  the  year)  is  as  follows: 

s.  d.  s.  d.  s.  d. 


1877- 
1878. 

1879- 


3. 10. I 

1880 

3  05.6 

1881 

300.3 

1882 

s. 
2.06 

2  02 

2  .  04 


I883. 
I884. 

I885. 


S. 

2. IO.7 

3  04-3 
3  03.7 


(6)   I  ryo  (unit  of  value  of  the  old  currency  system)  was  declared  in  the  Coinage 
Law  of  1 87 1  to  be  equal  to  1  yen. 


Chronological  Table 


Meiji     1st 
2d 

"         3d 

4th 

5th 

6th 

7th 

8th 

9th 

"      10th 

"      nth 

"      12th 

"      13th 

"      14th 


1868  A.  D.      M 

-iji  15th 

1869   " 

'   16th 

1870   " 

'   17th 

1871   " 

'   1 8th 

1872   " 

19th 

1873   " 

'   20th 

1874   " 

2ISt 

1875   " 

'    22d 

1876   " 

23d 

1877   " 

'   24th 

1878   " 

'   25th 

1879   " 

'   26th 

1880   " 

'   27th 

1881   " 

'   28th 

1882  A 

[884 

1885 
[886 

1887 
1888 
1889 
1890 
1891 
1892 

1893 
1894 

1895 


1). 


xm 


\  \ 


EXPLANATORY    TABLES 


CHRONOD  »GICAL  TABLE — (Continued) 


19th 

[896  A.  D. 

30th 

" 

"    1 

" 

j2d 

(899      " 

"      33d 

1900      " 

"     34th 

[901       " 

"     35th 

1902      " 

"     36th 

1  1  11  .  ; 

j7th 

[904 

(8th 

[905 

39th 

11,1,1, 

40th 

1907       " 

Mciji  41st 

1908  A.  D 

42d 

1909 

"       43d 

1910      " 

"      44th 

191 1      " 

"      45th  \ 
Taisho  1st  J 

1912      " 

2d 

1913      " 

"         3d 

1914      " 

4th 

1915      " 

"       5th 

1916      " 

"       6th 

1917      " 

Weights,  Measures  and  Money 

With  English,  American,  French  and  German  Equivalents 

Great  U.  S.  of 

Japan                    Britain            America  France  Germany 

Rl  =  :f\!  !"a„                  I  2.44030  2.44029  3-92727  392727 

=  2.100  A, »                   Miles  Miles  Kiloms.  Kiloms. 
=  12,900  Shaku. ...  1, 

...      Marine                           /  l  ■  I5I52  I-I5I5I  I -85318  I.85318 

Kl  (Marine) j  MUes  Miles  Kiloms.  Kiloms. 

crll.ir ,  ,,,-                       /5-95505  5-955oi-  I5-42347  I5-42347 

bclliari  lu \  Sq.  Miles  Sq.  Miles  Km.  Carres  Quadrat  Km. 

Uw  Z  !!L 7s' ."                  {2.45064  2.45062  99. 17355  99-17355 

-IO"-'                        Acres  Acres  Ares  Ar. 

=  3,000  Bu [ 

Tsubo=  10  Go                  /  3 .95369  3  95367  3 -30.S79  3-30579 

=  100 Shaku..  .  .  \  Sq.  Yards  Sq.  Yards  Centiares.  Quadratm. 

Koku=  10  To                  (  (4765389  1. 80391  1. 80391 

=  100  Slid               I  4.96005  J  Gallons  (Liq.)  Hectolitres  Hectolitres 

=  1 ,000  Go  I  Bushels  |  5 . 1 1902 

=  10,000  Shaku  .  .  I  [  Bushels  (Dry) 

Koku      (Capacity      offi/ioof  1    10  of  1/10  1/10 

ship) \  one  Ton  one  Ton  de  Tonne  Tonne 

■    -  1  000   A  Tnmmr     [  8  ■  26~™  8-26/33  3-75000  3    75000 

11  32277  1.32277  0.60000  0.60000 

2K»-  160  Momme. ...I  J*;  <£"*■>  1Tbs;^.voir)  Kilogs-  Kil°^ 

]    I .60754  !    60754 

[  lbs.  (Troy)  lbs.  (Troy) 

""irsSft,     i^.o.ssa  0.4984  2.583  2.0924 

=  I'^oilo 1 s-  d-  Do11-  Francs  Mark. 


CONTENTS 


PART   I — Expenditures  of  the  Sino- Japanese  War 

CHAPTER  ,  PAGE 

I     Introduction 3 

II     Disbursements  of  the  War 35 

III     Supply  of  War  Funds 47 

PART   II — Economic  Effects  of 
the  Sino-Japanese  War 

I     Introduction 81 

II     Effects  on  Public  Finance 87 

III  Effects  on  the  Money  Market 152 

IV  Effects  on  Industries 208 

V     Effects  on  Commerce 224 

VI     Effects  on  Transportation  and  Communication     254 

VII     Effects  on  Primitive  Industry 273 

VIII     Social  Effects 278 

IX     Conclusion 320 

Index 325 


PART  I 

EXPENDITURES  OF  THE 
SINO-JAPANESE  WAR 


Note. — In  the  tables  throughout  this  volume,  fractions  of 
yen  greater  than  one  half  have  been  counted  as  a  whole  yen 
and  the  other  fraction-  have  been  disregarded. 


CHAPTER  I 

INTRODUCTION 

(    ALSES   OF    THI-2    WAR 

What  the  Balkan  peninsula  has  so  long  been  to  Europe,  the 
peninsula  of  Korea  has  for  centuries  been  to  the  Far  East — 
a  "haunted  palace"  wherein  lurked  an  unceasing  source  of 
danger  to  the  peace  of  the  Orient.  With  a  vast  empire  more 
than  four  thousand  years  old  as  its  immediate  neighbor  on 
the  one  side  and  the  indomitable  Empire  of  Japan  on  the 
other,  it  was  not  strange  that  the  peninsula  never  gave  birth 
to  a  strong  or  independent  nation,  for  it  is  scarcely  possible 
for  small  trees  to  flourish  among  giants  of  the  forest. 

With  an  area  of  some  75,000  square  miles  (almost  as  large 
as  Italy)  and  a  population  of  about  12,000,000  (more  than 
that  of  Scandinavia)  the  country  can  not  be  regarded  as 
insignificantly  small;  yet,  overshadowed  as  it  was  by  two 
great  masculine  powers  on  either  side,  it  never  evinced  re- 
markable virility  or  greatness.  The  comparative  smallness 
of  the  peninsula,  however,  has  been  the  main  reason  why  the 
rulers  of  the  land  were  unable  to  maintain  undisturbed  rela- 
tions with  their  neighbors  or  establish  a  stable  government. 
Notwithstanding  the  fact  that  various  monarchies  arose  in 
the  peninsula  from  time  to  lime,  each  in  turn  assumed  a  char- 
acter either  of  half-hearted  independence  or  of  meek  sub- 
ordination, ever  at  the  mercy  of  its  more  powerful  neighbors 
whom  it  sought  to  humor  by  continual  evasion,  obsequious- 
ness and  adulation.  No  sacrifice  of  national  honor  or  prestige 
was  too  great  for  the  maintenance  of  a  mere  existence.  Indeed 
it  is  scarcely  too  much  to  say  that  there  m  \  er  has  existed  any 
really  independent  government  in  Korea,  as  tin-  feeble  and 
fickle  national  entities  of  the  peninsula  have  always  wavered 
in  uncertain  existence  through  the  political  upheavals  and 
changes  constantly  taking  place  on  the  Asiatic  continent. 
It  was  this  continued  political  instability  of  Korea  that  ren- 

3 


4  EXPENDITURES  OF     Mil     SINO-JAPANESE    WAR 

dered  the  country  a  menace  to  the  peace  and  welfare  of  Japan 
and  the  whole  of  the  Far  East. 

I  vi  ;i  the  Li  dynasty,  which  five  hundred  years  ago  over- 
threw the  kingdom  of  Korai,  was  unable  to  prove  more  per- 
manent than  its  predecessors,  following  along  in  the  same  path 
of  inconstancy  and  fluctuation.  As  its  power  declined  from 
year  to  year  it  resorted  to  every  possible  temporizing  expe- 
dient  that  suggested  itself  for  the  prolongation  of  its  life. 
Japan,  while  she  showed  sympathy  and  sought  to  help  Korea 
become  a  vigorous  and  independent  power,  free  from  disin- 
tegrating disturbances,  was  helpless  to  effect  reform,  as  she 
always  found  her  good  offices  ignored  or  treated  with 
discourtesy. 

In  spite  of  the  repeated  misdeeds  and  incivility  of  Korean 
officialdom  during  the  early  part  of  the  Meiji  Era,  Japan 
persisted  in  her  policy  of  leniency  and  willingness  to  forgive, 
protecting  the  peninsula  from  aggression  and  leading  all  other 
nations  in  recognizing  its  independence  by  signing  a  treaty  to 
that  effect  in  1877.  But  notwithstanding  these  efforts  for 
peace  and  reform,  the  misguided  officials  of  Korea  gave  this 
all-important  question  no  consideration,  but,  on  the  contrary, 
devoted  their  time  to  internecine  strife  in  following  out  their 
petty  ambitions  for  higher  authority,  often  engaging  in  peril- 
( »us  schemes  for  crushing  their  rivals.  Thus,  both  the  national 
and  international  affairs  of  the  country  were  left  to  go  their 
own  way. 

All  this  time  China  had  been  regarding  Korea  as  a  depend- 
ency  of  her  own,  and  was  interfering  both  directly  and  indi- 
rectly  in  the  internal  affairs  of  the  helpless  country.  It  was 
but  natural,  perhaps,  that  China  should  mistrust  and  dislike 
Japan's  paternal  attitude  toward  Korea  and  try  by  every 
means  to  prevent  greater  intimacy  between  them,  a  .policy 
which  finally  culminated  in  the  uprisings  of  1882  and  1884. 
h  o\  these  insurrections  was  due  to  a  struggle  for  superi- 
ority between  the  Conservatives  and  Progressives,  the  one 
party  siding  with  China  and  the  other  with  Japan,  time  driv- 
ing them  farther  and  farther  apart.     Consequently  after  the 


INTRODUCTION  5 

disturbances  of  1884,  in  order  to  prevent  an  unwelcome  con- 
flict with  China,  Japan  concluded  the  Treaty  of  Tientsin, 
which  recognized  and  authorized  equality  of  rights  for  both 
Japan  and  China  in  the  peninsula.  Nevertheless,  China 
obstinately  continued  to  regard  Korea  exclusively  as  her 
own  dependency,  thus  paying  little  or  no  attention  to  t he- 
treaty.  Having  long  maintained  a  footing  in  Korea,  China 
now  assumed  an  aggressive  and  menacing  attitude,  contrh  ing 
so  to  complicate  the  situation  as  to  render  it  intolerable  to 
Japan.  Apparently  it  was  China's  policy  to  subject  Japan 
to  insufferable  pressure  and  leave  her  to  take  what  course 
she  would,  knowing  that  the  island  empire  could  not  continue 
to  go  on  yielding  step  by  step  to  the  aggressor.  Thus  was 
laid  the  egg  from  which  was  hatched  the  Sino-Japanese  War. 
Historically,  of  course,  there  should  have  been  no  ground 
of  conflict  between  Japan  and  China.  Their  relations  from 
the  earliest  days  had  been  those  of  friendly  neighbors,  has  ing 
their  common  roots  in  similar  doctrines  as  to  government, 
nature  of  civilization,  law,  art,  literature,  religion  and  moral- 
ity. In  former  times  Japan  had  in  main-  lines  been  a  pupil 
of  China,  imbibing  the  virtues  of  early  Chinese  civilization 
which  in  ancient  times  was  remarkably  advanced.  But  with 
the  incessant  expansion  of  European  activity  in  the  Orient, 
Japan  was  well-nigh  obliged  to  strike  out  for  herself  and  soon 
left  China  far  behind.  Japan  labored  earnestly  for  the  intro- 
duction of  enlightened  laws,  form  of  government  and  mode 
of  living;  whereby  she  soon  grew  into  a  nation  far  superior  to 
her  former  self  and  also  to  her  big  neighbor,  from  whom  she 
had  once  been  contenl  to  learn.  Meanwhile,  ( Ihina  remained 
unchanged,  confined  to  the  rut  which  she  had  trodden  for 
thousands  of  years.  Already  separated  by  a  narrow  sea,  the 
two  nations  now  became  separated  by  differences  in  civiliza- 
tion and  national  policy,  the  one  aspiring  to  enjoy  the  best 
of  western  civilization,  the  other  slumbering  in  antiquated 
Asiatic  conventionalism.  Consequently,  though  Japan  had 
once  regarded  China  as  a  great  nation,  she  now  could  not  but 
consider  her  as  stubbornly  conservative,  incapable,  and  even 


6  EXPENDIT1  RES   OF   THE   SINO-JAPANESE    WAR 

moribund;  while  China,  on  her  side,  looked  upon  Japan  with 
contempt,  as  an  upstart  and  a  shallow  imitator  of  western 
barbarians  in  fact,  a  mischievous  and  diminutive  empire 
thai  could  accomplish  nothing  great.  Thus  estrangement 
grew  ever  more  pronounced  as  the  two  countries  fell  further 
and  furt Ikt  apart  in  thought  and  action,  until  at  last  the 
inevitable  open  conflict  was  seen  to  be  close  at  hand. 

Moreover,  the  natural  pride  and  mutual  suspicion  of  the 
two  countries,  of  nearly  equal  strength,  now  tended  to  accen- 
tuate mutual  hatred  and  jealousy  and  each  began  to  take 
warning  and  prepare  for  a  sudden  rupture  of  relations.  The 
Loochoo  and  Formosan  questions,  discussion  of  which  we 
reserve  for  later  treatment,  would  not  have  led  to  repeated 
failure  of  negotiations,  and  finally  to  trouble,  had  China  and 
Japan  been  on  friendly  terms  at  the  time.  The  unhappy 
estrangement  was  then  far  advanced  and  ever  growing  wider 
and  deeper;  and  so,  after  the  disturbances  of  1882,  Korea 
became  the  principal  cause  of  dispute  between  Japan  and 
China.  The  Togakuto  affair  only  brought  the  trouble  to  a 
head,  and  showed  that  at  some  time  in  the  future  Japan 
would  be  forced  to  take  up  arms  to  settle  her  difficulties  with 
China,  to  ensure  reform  in  Korea,  and  peace  in  the  Orient. 

As  the  fate  of  Japan  was  bound  up  with  that  of  Korea  she 
could  no  longer  endure  the  ever-increasing  maladministration 
and  degradation  of  the  hermit  kingdom.  In  addition,  China's 
constant  disregard  of  her  treaty  with  Japan,  especially  after 
the  Togakuto  difficulty,  her  treating  Korea  as  still  a  Chinese 
dependency,  together  with  her  attempts  to  intimidate  Japan 
to  gratify  her  own  caprices,  rendered  conflict  inevitable. 
Though  Japan  was  well  aware  of  the  backward  state  of  China, 
she  yet  had  no  desire  to  come  to  blows  with  so  great  and 
ancient  a  nation.  Nothing  but  absolute  necessity  for  the 
defense  of  her  own  existence  would  ever  have  induced  Japan 
to  take  ii])  arms  against  China. 

In  short,  the  Sino-Japanese  War  was  a  conflict  between 
two  civilizations  that  had  grown  too  dissimilar  to  exist  longer 
in  harmony  side  by  side;  but  the  Korean  question  was  its 


INTRODUCTION  7 

immediate  cause;  and  it  was  specifically  the  means  whereby 
Japan  sought  to  establish  permanently  her  own  independence 
and  the  peace  of  the  Far  East.  In  Japan  sympathy  with 
Korea  was  universal,  coupled  with  a  strong  desire  to  check 
the  arrogance  of  China  by  a  chivalric  blow.  Doubtless,  as  in 
all  wars,  there  were  other  contributory  causes,  for  never  in 
the  history  of  the  world  has  any  country  gone  to  war  and 
undergone  sacrifice  of  men  and  money  merely  for  the  sake  of 
another  nation!  Definite  proof  of  this  contention  could  be 
advanced  in  examples  beyond  number.  Japan's  ultimate 
action  against  China  was  not  without  good  cause  for  it  was 
for  the  sake  of  her  own  existence  and  for  Oriental  pe 
NOw,  we  shall  proceed  briefly  to  review  the  historical  relations 
between  Japan  and  China,  the  immediate  cause  of  the  war, 
the  disbursements  consequent  upon  the  war,  and  the  eco- 
nomic effects  of  the  war. 

Historical  Relations  between  Japan  and  China 

The  war  between  Japan  and  China  brought  to  an  end  the 
dispute  as  to  Korea,  driving  the  Chinese  forces  permanently 
out  of  the  peninsula;  and  furthermore  it  introduced  Japan  to 
the  outer  world,  assigning  her  a  new  position  among  the 
powers.  The  war,  moreover,  exposed  the  weakness  of  China 
and  hastened  the  decline  of  her  territorial  integrity.  Soon 
afterwards  she  was  compelled  to  submit  to  the  German  occu- 
pation of  Kiaochow,  to  lease  Port  Arthur  to  Russia,  Weihai- 
wei  to  the  British  and  Kwangchow  Bay  to  the  French,  all 
sweeping  changes  which  occurred  immediately  after  the  war. 
Before  that  time  there  had  been  some  aggression  on  the  part 
of  Western  Powers  in  China,  such  as  the  Opium  War,  the 
Franco-British  allies'  capture  of  the  Taku  forts,  and  the 
Sino-French  War;  but  these  were  insignificant  compared  to 
the  inroads  which  took  place  after  this  war.  Thus  Japan 
opened  the  eyes  of  European  Powers  to  possibilities  in  the 
Far  East  at  a  time  when  there  was  nothing  in  Europe  to  tempt 
their  lust  for  territorial  expansion. 

Historically,  as  well  as  geographically,  the  Korean  peninsula 


I   \i'l  \|.i  i  I  R]  S  OF     I  HI     SINO-J  IPANESE    WAR 

has  been  the  bridge  by  which  Japan  lias  always  sought  access 
to  the  continenl  of  Asia;  and  at  the  same  time  she  lias  always 
irded  it  as  a  barrier  to  assure  her  territorial  safety.  It  is 
clear  from  the  pages  of  history  that,  as  the  unification  of 
the  empire  became  more  firmly  established  and  population 
expanded,  the  overflow  ever  sought  relief  in  the  direction  of 
Korea.  Expeditions  to  Korea  by  the  Emperor  Sujin,  the 
Empress  Jingo,  I  lideyoshi  Taiko,  as  well  as  the  argument  for 
Korean  invasion  in  the  early  part  of  the  Meiji  Era,  are  vivid 
experiences  in  the  memory  of  Japan.  In  his  history  of  Korea, 
Dr.  William  Elliot  Griffis  well  says  that  it  is  impossible  to 
discuss  the  history  of  the  peninsula  without  taking  Japan 
into  consideration,  just  as  one  can  not  deal  with  medieval 
English  history  without  including  France.  Having  had  so 
intimate  an  historical  relationship  with  that  country,  the 
Japanese  mind  feels  naturally  both  familiar  with  and  friendly 
toward  the  Korea  of  today.  From  the  dawn  of  Japanese 
history  comes  the  tradition  that  Susano-no-Mikoto  dispatched 
his  son  Isotake-no-Mikoto  to  Korea  to  occupy  and  rule  Soshi- 
mori  in  the  kingdom  of  Shiragi;  and  mythology  suggests 
that  Okuninushi-no-Mikoto  transported  from  Korea  the  ter- 
ritory with  which  to  extend  the  promontory  of  Kizuki  in  the 
Izumo  Province.  As  there  is  usually  some  substratum  of  fact 
underlying  tradition,  we  may  infer  that  intercourse  between 
Japan  and  Korea  has  been  intimate  and  unbroken  from 
earliest  times.  It  would,  therefore,  seem  but  natural  that 
Japan  should  occupy  a  part  of  Korea  in  establishing  her 
relations  with  the  continent  of  Asia. 

As  to  China's  relations  with  Korea,  it  must  be  remembered 
that  that  dynasty,  as  soon  as  it  attained  full  power,  invaded 
and  oppressed  t  he  peninsula  without  mercy.  Modern  intimate 
relation-  between  the  two  began  about  the  year  1620,  in  the 
reign  of  the  Emperor  Tai  Tsung  of  the  Chin  dynasty,  after 
which  time  the  Chinese  practically  exercised  suzerainty  over 
Korea  and  extorted  tribute  from  her;  yet,  shrewdly  enough, 
whenever  any  trouble  arose  over  affairs  in  the  peninsula, 
China  tried  to  escape  all  responsibility,  even  to  the  extent  of 


INTRODUCTION  9 

denying  her  protectorate,  while  Korea  in  each  case  handed 
all  the  profits  to  her  overlord.  Although  China  thus  for- 
mally denied  her  authority  over  the  country,  she  never  \"V  a 
moment  abandoned  it  in  fact;  and,  consequently,  when  the 
trouble  arose  with  Japan,  the  Chinese  Government,  having 
already  lost  her  reputation  for  diplomacy,  had  no  recourse 
but  an  appeal  to  arms. 

The  first  trouble  with  foreigners  came  in  1865  when  a  French 
missionary  was  assassinated.  Prince  Heung-Sun,  father  of 
the  then  Emperor  of  Korea,  better  known  as  Tai-Wonkun, 
cast  over  the  government  the  shadow  of  his  blind  nationalism; 
and  when  a  Russian  ship  visited  Wonsan,  requesting  permis- 
sion to  trade  with  Korea,  the  Prince  asked  the  French  mis- 
sionary Bellenue  to  request  the  foreign  vessel  to  leave  the  port 
at  once.  The  missionary  declined  to  interfere  and  the  Prince, 
suspecting  him  of  being  a  European  spy,  had  him  beheaded. 
When  satisfaction  was  demanded  by  the  French  Legation  at 
Peking  the  Chinese  authorities  endeavored  to  evade  responsi- 
bility by  replying  that  the  peninsula  was  no  longer  a  poss 
sion  of  China.  In  the  following  year,  when  the  wreck  of  the 
General  Sherman  and  the  massacre  of  her  crew  on  the  banks 
of  the  Taidong  River  created  international  complications, 
China  again  tried  to  shift  the  responsibility,  answering  that 
she  had  no  authority  over  Korea  in  matters  relating  to  war 
and  peace.  Yet  tw<>  years  afterwards,  when  Japan  sent  an 
embassy  to  Korea  for  the  purpose  of  acquainting  the  penin- 
sular government  with  the  Meiji  Restoration  and  consequent 
political  changes  and  al><>  to  renew  friendly  relations,  the 
Koreans  (being  stirred  up  by  China),  suspected  Japan's 
motives,  and  treated  the  embassy  with  disdain.  In  [872 
Japan  brought  to  an  end  the  practice  of  sending  a  tribute- 
bearing  vessel  from  the  Tsushima  elan  and  proclaimed  free 
commercial  intercourse,  stationing  an  official  at  Fusan  for 
this  purpose.  Bui  Prince  Heung-Sun  offered  an  unwarranted 
official  insult  which  created  universal  indignation  in  Japan, 
where  there  arose  a  general  demand  for  the  chastisemenl  «>t 
Korea.     In  the  following  year  Count  Soejima  was  dispatched 


[0  EXPENDITURES   01    THE    SINO-JAPANESE    WAR 

to  <  liin.i  to  requesl  explanation  of  the  offense  and  to  ascertain 
definitely  the  exact  relation  between  ( 'hina  and  Korea;  where- 
upon the  Chinese  Governmenl  denied,  as  before,  that  it  was 
in  any  way  responsible  for  Korea,  saying  that  the  peninsula 
was  in  no  sense  a  vassal  state. 

Although  the  Japanese  Government  and  people  endured 
with  remarkable  patience  the  insults  inflicted  by  Korea,  the 
latter  country  in  no  way  amended  her  attitude;  and  in  August, 
i s 7 5 ,  when  Lieutenant  Commander  Ryoka  Inouye,  who  had 
been  engaged  in  surveying  operations  on  board  the  warship 
Unyo,  anchored  off  the  island  of  Kanghwa  near  Seoul,  he  was 
fired  upon  by  the  island  forts.  The  Japanese  ship  replied 
and  destroyed  the  forts  as  well  as  killing  35  of  the  garrison. 
Upon  the  affair  being  reported  by  the  Commander  to  the 
Japanese  Government,  Japan  immediately  dispatched  her 
men-of-war  to  Fusan,  to  protect  the  Japanese  there.  In 
1876,  an  envoy  was  at  once  sent  to  demand  satisfaction,  the 
mission  including  Kiyotaka  Kuroda  as  chief  and  Kaoru 
Inouye  as  vice  minister.  This  embassy  requested  satisfac- 
tory settlement  of  the  Kanghwa  question  and  the  opening  of 
K(  >rean  ports  to  trade.  Aritomo  Yamagata,  then  Minister  of 
War,  proceeded  to  Shimonoseki  with  troops  so  as  to  be  ready 
for  any  emergency.  The  repeated  negotiations  proved  abor- 
tive and  the  embassy  was  about  to  abandon  its  fruitless  efforts 
and  return  when  suddenly  Bokukeiju,  a  state  councillor,  and 
( roko,  an  interpreter,  revolted  against  Prince  Heung-Sun  and 
insisted  on  opening  the  peninsula  to  trade,  to  which  the 
Korean  Government  finally  assented;  and  on  February  26, 
1876,  a  letter  of  apology  was  offered  for  the  Kanghwa  Island 
affair  and  a  treaty  of  12  articles  signed,  the  main  points  of 
which  were  that  (1)  Korea  was  to  remain  an  independent 
kingdom  and  enjoy  relations  with  Japan  on  equal  terms; 
that  both  countries  should  be  ready  to  exchange  envoys 
at  any  time  necessary;  (3)  that  after  29  months  Korea  was 
to  open  two  ports  to  trade,  Japan  having  leave  to  station  con- 
suls there;  (4)  that  Japanese  navigators  were  to  have  permis- 
sion to  survey  Korean  waters;  and  (5)  that  cases  of  trouble 


INTRODUCTION  I I 

among  the  nationals  of  either  country  residing  in  the  two 
open  ports  were  to  be  settled  by  the  officials  of  the  nationals 
concerned. 

The  treaty  being  duly  signed  the  Japanese  representatives 
returned,  and  the  Korean  Government  dispatched  a  special 
envoy  to  Tokyo  to  strengthen  the  friendship  with  Japan, 
while  the  latter  created  a  legation  in  Seoul,  sending  Yoshikata 
Hanabusa  as  Charge  d'Affaires.  In  1887  when  the  Korean 
authorities  attempted  to  expel  all  foreign  missionaries,  tin- 
French  Minister  in  Tokyo  endeavored  to  have  the  Japanese 
representative  in  Seoul  mediate  for  the  relief  of  the  mission- 
aries, and  the  Japanese  Government  opened  negotiations  in 
the  matter;  but,  discovering  in  the  Korean  reply  phrases  that 
indicated  Korean  acknowledgment  to  being  a  tributary  state 
of  China,  Japan  objected,  and  Korea  reported  the  matter  to 
China.  As  the  Chinese  reply  contained  similar  contentions, 
Japan  rejected  that  also.  No  further  discussion  was  carried 
on,  as  Japan's  treaty  with  Korea  had  already  settled  the 
matter  of  that  country's  independence. 

Previous  to  this,  in  1872,  there  had  been  trouble  in  Formosa, 
when  some  natives  of  Miyako  Island,  Loochoo,  who  had  been 
ashore  in  Formosa,  were  murdered  by  the  natives,  tin- 
same  crime  being  repeated  in  the  following  year  on  men  from 
the  prefecture  of  Oda.  To  avoid  a  repetition  of  such  out- 
rages, the  Tokyo  Government  made  Loochoo  distinctly  a 
Japanese  possession,  instead  of  allowing  its  ruler  to  pay  tribute 
both  to  Japan  and  China  as  before,  and  dispatched  Count 
Soejima  to  China  to  carry  on  negotiations.  Up  to  this  time 
about  half  of  Formosa  had  been  under  Chinese  rule,  while  the 
rest  was  abandoned  to  anarchy.  China,  as  usual,  endeav  ored 
to  fight  shy  of  responsibility,  denying  that  she  had  any  auth<  >r- 
ity  over  the  island.  But  alarmed  by  the  overwhelming  vic- 
tory of  the  Japanese  expedition  to  Formosa,  involving,  as  it 
did,  the  surrender  of  numerous  clan  chiefs,  China  demanded 
the  withdrawal  of  the  Japanese  force-.  Japan  refused  to 
comply  with  the  demand  but  after  various  n«  gotiations  agreed 
to  evacuate  on  condition  that  China  recognize  Japan'-  - 


12  l  XPENDIT1  RES   OB    THE   SINO-JAPANESE    WAR 

ereignty  over  the  Loochoo  Islands  and  pay  an  indemnity  of 
500,000  taels. 

In  consequence  of  the  increa  Ing  influence  of  Japan  in 
Korea  and  the  intimacy  thai  now  marked  their  relations 
alter  the  settlement  of  the  Kanghwa  affair,  as  well  as  on 
account  of  Japan's  firm  attitude  in  regard  to  the  Loochoo  and 
Formosan  questions,  China  began  to  feel  uneasy  and  wished 
to  check  the  further  advance  westward  of  Japan's  influence. 
To  achieve  this  object  with  some  appearance  of  tact,  China 
invited  Occidental  Towers  into  the  peninsula,  the  United 
States  being  the  first  to  be  so  favored.  She  even  dispatched 
a  warship  of  her  own  to  bring  over  the  American  envoy,  and 
it  is  said  that  Li  Hung  Chang  himself  drew  up  the  articles 
signed  by  the  United  States  and  Korea.  He,  moreover, 
informed  Prince  Heung-Sun  that  to  form  a  treaty  with  West- 
ern Towers  was  the  best  way  to  ensure  the  safety  of  Korea. 
Great  Britain,  Germany  and  other  powers  at  once  followed 
the  American  example.  Here  we  see  clearly  the  change  of 
Chinese  policy  toward  Korea.  But  notwithstanding  all  the 
efforts  of  Li  Hung  Chang  to  carry  out  his  plans  secretly,  there 
was  a  sudden  turn  of  affairs,  which  had  its  origin  in  the  politi- 
cal disorder  that  occurred  in  Seoul  in  1882. 

In  accordance  with  the  treaty  of  1876,  Korea  opened  the 
port  of  Wonsan  to  trade  in  May,  1880,  and  proposed  to  open 
Chemulpo,  to  which  Japan  had  sent  a  surveyor,  in  July,  1882. 
By  this  time  Japanese  influence  was  becoming  dominant  in 
the  Progressive  party  in  Korea  and  a  strong  organization  was 
effected.  In  addition,  important  reforms  were  brought  about 
in  the  military  system  of  Korea,  and  Lieutenant  Hori  of  the 
Imperial  Japanese  Army  became  instructor.  The  leaders  of 
the  Progressives  were  Kim  Ok  Kiun,  Hung  Tiyong  Ou  and 
Li  Sai  Ben,  who  had  the  sympathy  and  support  of  the  leader 
of  the  Mins.  The  Conservatives  were  led  by  Prince  Heung- 
Sun,  who  hat  i'd  everything  foreign  and  began  an  intrigue 
inst  the  Japanese  and  the  Progressive  party.  The  Mins, 
who  wire  members  of  the  family  of  the  Queen  of  Korea,  had 
for  main'  years  tilled  the  highest  offices  of  state.     The  Con- 


INTRODUCTION  1 3 

servatives  now  planned  to  drive  out  the  Japanese,  even  if  it 
required  force.  The  native  soldiery  were  deprived  of  proper 
rations  until  infuriated,  and  then  were  told  all  sorts  of  mali- 
cious stories  about  the  Japanese.  On  pretext  of  punishing  Min 
Ken  Kwong,  a  member  of  the  Min  clan,  for  some  slight  offense 
against  army  regulations,  a  furious  mob  gathered  and  began 
to  hunt  the  Japanese  to  death,  and  the  legation  was  attacked. 
The  Japanese'  Minister,  Hanabusa,  with  over  twenty  of  his 
fellow  countrymen,  fought  his  way  out  into  the  terrorized 
streets  of  Seoul  and  escaped  to  Chemulpo,  where  he  embarked 
on  a  junk  and  was  picked  up  by  a  British  ship  and  taken  to 
Nagasaki.     This  outbreak  took  place  on  July  23,  1882. 

Upon  receiving  the  report  of  the  Japanese  Minister  regard- 
ing the  affair,  the  government  sent  him  back  to  Seoul  on 
August  20,  to  demand  an  explanation  of  the  King.  In  the 
meantime,  Prince  Heung-Sun  had  already  assumed  the  reins 
of  government  and  on  the  minister's  arrival  showed  no  sign 
of  a  conciliatory  mood.  The  latter  was,  therefore,  obliged  to 
withdraw  to  Chemulpo.  Then  Li  Hung  Chang,  fearing  that 
Japan  might  either  kidnap  Prince  Heung-Sun  or  dethrone  the 
King  in  some  plot  with  the  Prince,  dispatched  a  body  1  >f  t  n « »]  is 
under  Yuan  Shi  Kai,  Bakeuchu  and  Teijosho  to  Korea,  the 
intention  being  professedly  peaceful.  Under  pretext  of 
inviting  Prince  Heung-Sun  to  a  friendly  conference,  the 
Chinese  laid  hands  on  him  and  spirited  him  away  to  China. 
On  the  Prince's  departure,  the  scene  changed  in  a  flash.  The 
Progressive  party  assumed  office  and  a  treaty  was  signed 
at  Chemulpo  on  Augusl  30,  [882.  By  this  agreemenl  the 
Korean  < Government  had  to  apologize  to  Japan,  and  to  permit 
the  presence  of  Japanese  troops  in  Seoul  to  protect  the  li 
ii<>n ;  the  cost  of  furnishing  as  well  as  of  repairing  the  barracks 
for  the  guard  had  to  be  borne  by  the  Government  of  Korea. 
Japan  agreed  to  withdraw  the  guard  after  one  year  from  the 
signing  of  the  agreement  if  she  deemed  it  safe  to  do  so.  Other 
clauses  of  the  treaty  provided  for  the  opening  to  trade  of 
Wonsan,  Fusan,  and  Chemulpo,  etc.,  and  the  port  of  Yokai- 
chin  after  a  year,  while  the  Japanese  Minister  and  staff  wire 


I  I  EXPENDITURES   01    THE    SINO-JAPANESE    WAR 

given  permission  to  travel  in  the  interior.  It  is  significant 
thai  a1  this  time  Japan  again  acknowledged  the  independen<  e 
oi  Korea,  and  consented  to  use  in  the  treaty  the  date  of  the 
Korean  i  alendar,  which  was  the  lour  hundred  and  ninety-first 
year  from  the  founding  of  the  dynasty.  It  was  from  that 
date  also  that  the  Korean  national  flag  began  to  be  used. 

The  action  of  the  Chinese  in  abducting  a  Korean  prince 
and  detaining  him  at  Tientsin  could  only  be  regarded  as  one 
more  proof  of  China's  desire  to  treat  Korea  as  a  subject  state. 
From  this  lime  China  endeavored  by  all  means  to  associate 
herself  with  the  home  affairs  of  Korea,  which  finally  com- 
pelled Japan  to  attempt  to  remove  Chinese  influence  entirely 
from  the  peninsula. 

In  January,  1883,  the  Japanese  Government  sent  Shinichiro 
Takezoe  as  resident  minister  to  Korea,  allowing  him  a  legation 
guard  in  accordance  with  the  rights  conceded  in  the  treaty  of 
Chemulpo.  At  that  time  Yuan  Shi  Kai  was  also  in  Seoul, 
barked  by  a  considerable  force,  and  was  laboring  assiduously, 
through  the  efforts  of  Min,  for  the  establishment  of  Chinese 
influence  throughout  the  peninsula,  Min  on  his  part  aiming 
at  promoting  his  own  personal  interests  with  the  assistance  of 
China.  The  Progressive  party,  being  thus  left  in  the  lurch 
by  Min,  looked  to  the  Japanese  Minister  for  sympathy  and 
waited  for  a  favorable  opportunity  to  strike  an  effective  blow 
at  the  Conservatives,  who  were  then  wavering  considerably, 
1  ro  ing  to  China's  trouble  with  France  over  the  Annam  bound- 
ary question.  On  December  4,  1884,  during  an  official  dinner 
in  Seoul  to  celebrate  the  opening  of  the  Postoffice,  the  oppor- 
tunity was  seized  by  Kin  Gyoku  Kin,  Bokueiko,  and  others  of 
the  Progressive  party  to  attack  Prince  Min,  who,  together 
with  several  of  the  ministers  of  the  Conservative  party,  was 
assassinated;  they  further  endeavored  to  place  the  King's 
palace  under  guard. 

The  King  having  requested  protection,  a  Japanese  force 
under  Minister  Takezoe  entered  the  palace  and  ensured  safety. 
The  next  day  a  cabinet  representing  the  Progressive  party 
was  formed,  but  at  dawn  on  the  succeeding  day  Yuan  Shi 


INTRODUCTION  15 

Kai,  assisted  by  the  remnant  of  Min's  followers,  attacked  the 
palace.  The  Japanese  force-  defended  it,  but  in  vain.  They 
finally  had  to  retire  to  the  legation,  the  King  taking  refuge 
with  the  Chinese  forces  and  a  Conservative  cabinet  being 
installed.  That  night  the  Japanese  Legation  was  assaulted 
and  the  minister,  accompanied  by  his  staff,  together  with 
Kim  and  Hung,  fled  for  their  lives  to  Chemulpo,  leaving  the 
legation  in  flames.  The  Japanese  Government  then  dis- 
patched Kaoru  Inouye,  Minister  of  Foreign  Affairs,  as  pleni- 
potentiary to  Seoul  for  the  settlement  of  the  trouble.  Tin- 
Treaty  of  Seoul  was  signed  on  January  9,  1885,  requiring  an 
apology  from  Korea  and  the  reconstruction  of  the  legation 
and  barracks  at  Korea's  expense. 

Thus  the  affair  was  settled  as  far  as  Korea  was  concerned. 
But  China  had  still  to  be  heard  from;  and  for  this  purp< 
Prince  Itom,  then  Marquis,  was  di>patched  to  Peking,  where 
he  and  Li  Hung  Chang  drew  up  and  signed  the  Treaty  of 
Tientsin,  on  April  18,  1885.  The  treaty  made  no  reference  to 
the  assault  of  the  Chinese  soldiery  on  the  Japanese  Legation 
at  Seoul,  but  acknowledged  the  equal  rights  of  both  nations 
to  send  troops  to  Korea  in  case  it  should  be  necessary  in  the 
future.  The  clauses  of  tin-  treaty  provided  (1)  that  China 
should  withdraw  all  her  troops  from  Korea,  and  Japan  her 
legation  guards,  the  withdrawal  to  take  place  within  four 
months  from  tin-  signing  of  the  agreement,  under  pain  of  con- 
flict. The  Chinese  troops  wen-  to  withdraw  by  way  of  M,h- 
ampo  and  the  Japanese  by  way  of  Chemulpo.  2)  Both 
countries  agreed  further  to  advise  the  King  of  Korea  to  train 
a  modern  army  for  the  protection  of  the  peninsula  and  the 
maintenance  of  order  therein,  and  to  have  him  employ  foreign 
instructors  for  tin-  purpose,  neither  country  to  send  officers 
to  fill  the  positions.  (3)  In  tin-  third  place,  it  was  agreed  in 
the  treaty  that  if  in  the  future  either  Japan  or  China,  or  both, 
should  have  occasion  to  dispatch  troops  to  EC >rea,  they  should 
open  communication  with  each  other  as  to  the  matter,  and 
that  when  the  cause  requiring  the  entry  of  troops  no  longer 
existed,  they  were  to  be  at  once  withdrawn  from  the  country. 


[6  EXPENDITURES   01    THE    SINO-JAPANESE    WAR 

li  was  further  stipulated  thai  if  any  of  the  troops  in  Seoul 
should  be  guilty  of  improper  conduct  China  should  punish 
them  on  the  production  of  indisputable  evidence. 

A  general  retrospect  of  the  disturbance  of  1884  shows  that 
the  Progressives  were  defeated  on  account  of  their  too  impetu- 
ous grasp  of  political  power  without  sufficient  forethought, 
and  that  the  Japanese  Minister  was  also  somewhat  rash  in 
acceding  too  hastily  to  the  King's  request  for  protection, 
since  the  monarch  did  not  sincerely  trust  him,  but  on  the  con- 
trary sought  refuge  under  the  flag  of  China.  Moreover,  the 
minister  took  no  immediate  steps  for  the  correction  of  the 
Chinese  soldiers  when  they  assaulted  the  legation  and  slew 
some  of  its  guards.  It  was  but  natural,  therefore,  that 
Japan's  influence  should  gradually  decline,  while  China's 
continued  to  grow  more  and  more  throughout  the  peninsula. 
The  Conservative  party  soon  became  dominant,  under  the 
Chinese  Minister,  Yuan  Shi  Kai.  He  brought  his  influence 
constantly  to  bear  on  Korean  diplomatic  policy  and  the 
Korean  Government  in  turn  was  ever  inclined  to  heed  his 
counsel.  The  whole  situation  became  unfavorable  for  Japan, 
and  the  general  attitude  of  the  people  grew  insolent  and  offen- 
sive toward  all  Japanese  residents,  especially  toward  those 
engaged  in  commerce  and  industry. 

The  most  severe  blow  of  the  time  to  the  Japanese  was  the 
issue  of  the  Bokokurei  of  1889.  In  September  the  authorities 
of  Kankyodo  suddenly  prohibited  the  resale  and  export  of 
agricultural  products  without  any  previous  notice  to  the 
Japanese  consul,  in  spite  of  the  clause  in  the  treaty  requiring 
such  notice  a  month, in  advance.  Although  the  same  treaty 
clearly  stated  the  necessity  of  drought  or  riotous  disorder  as 
the  cause  of  such  law,  there  was  nothing  of  the  kind.  The 
loss  inflicted  upon  the  Japanese  was  quite  heavy.  Japan 
demanded  the  repeal  of  the  measure  and  some  indemnity, 
but  her  demand  was  left  unheeded  until  January,  1893.  Kin 
(  .\.>kii  Kin,  the  leader  of  the  pro-Japanese  faction,  was  assas- 
sinated about  thai  time,  during  a  quarrel  between  the  sailors 
of  a  Chinese  warship  and  some  citizens  of  Nagasaki,  and  the 


INTR0D1  I   1  EON  17 

Japanese  Government  had  to  make  humiliating  concessions 
despite  the  fact  that  the  fault  was  on  the  Chinese  side.  In 
this  manner  conditions  began  to  obtain  derogatory  to  Japan's 
interests. 

The  Korean  Government  brutally  mutilated  in  public  the 
body  of  Kin  and  exhibited  it  with  immense  gusto  all  over  the 
country  as  an  example  of  what  should  be  the  just  fate  of  all 
traitors.  The  victim  was  called  "the  most  vicious  traitor 
Kin." 

Just  about  this  time  (April,  1894)  the  revolutionary  move- 
ment of  Tong  Haks  began  to  spread  fiercely  over  the  penin- 
sula, more  especially  in  the  provinces  of  Cholla  and  Chung- 
Chong.  Although  the  Tong  Hak  belief  was  quite  a  foolish 
and  superstitious  one,  supporters  of  the  doctrine  were  found 
in  every  province  of  the  country.  As  the  population  had 
long  been  suffering  from  the  misrule  of  Min  and  were  anx- 
iously awaiting  a  change,  they  at  once  favored  the  Tong  Hak 
movement.  The  first  definite  outbreak  occurred  at  Ko-Po 
in  the  province  of  Cholla,  where  maladministration  had  been 
particularly  oppressive;  and  three  provinces  south  of  the 
Kanko  River  unfurled  the  flag  of  insurrection.  The  Tong 
Hak  leader  of  this  rebellious  force  in  the  south  was  Zempojun, 
who  repeatedly  expelled  the  governmental  force.  Terrified 
beyond  measure  by  the  situation,  the  Korean  Government 
sought  the  intervention  of  China  through  the  mediation  of 
Yuan  Shi  Kai.  As  Japan  was  in  the  throes  of  political  tur- 
moil in  the  Imperial  1  >iet  at  the  time,  China  assumed  that  it 
would  not  be  easy  for  Japan  to  take  much  interest  in  foreign 
complications.  Under  pretexl  of  guarding  a  tributary  nation 
in  her  habitual  manner,  China  sent  troops  into  Korea,  and 
tli is  action  she  made  known  on  June  7  to  the  Tokyo  Govern- 
ment through  her  minister  there.  Japan  at  once  denounced 
China's  pretension-  to  suzerainty  in  Korea,  and.  in  ai  o irdance 
with  the  treaty  of  Tientsin,  informed  China  of  her  intention 
to  dispat<h  tones  to  guard  her  legation  and  interests  in  the 
peninsula.  Japan  at  once  sent  her  troop-  from  the  9th  Army 
Division  under  Major-General  Oshima,  which,  on  accounl  of 
3 


I-  i  \n  NDIT1  Rl  -    OF    THE   SINO-JAPANESE    WAR 

their  irregular  composition,  were  known  as  the  Mixed  Brigade. 
These  troops  marched  into  Seoul  and  Wonsan  on  June  13. 

Previous  to  taking  this  action  the  Japanese  Government, 
in  sympathy  with  her  unfortunate  neighbor  and  in  the  belief 
that  Korea's  disorders  would  cause  loss  and  have  bad  effects 
on  both  Japan  and  China,  as  these  three  countries  border  on 
each  otlnr  so  closely,  had  sent  a  friendly  note  to  China,  pro- 
posing  that  the  two  powers  should  cooperate  in  bringing 
about  reforms  in  Korea,  so  as  to  avoid  further  complications 
between  Japan  and  China  and  thus  maintain  peace  in  the 
Orient.  China  rejected  the  proposal,  not  deeming  necessary 
the  measures  suggested,  and  not  wishing  to  interfere  in  the 
internal  affairs  of  Korea  jointly  with  Japan.  China  insisted 
•  m  t  he  withdrawal  of  the  troops  of  the  two  powers,  saying  that 
these  were  unnecessary,  since  the  Tong  Hak  movement  was 
already  pacified.  Thus  China  continued  to  assert  her  suze- 
rainty over  Korea  in  various  ways  and  dreamed  of  making 
herself  master  of  the  Far  East,  while  Japan  continued  as 
positively  to  refuse  to  acknowledge  this  overlordship. 

Notwithstanding  her  earlier  consent  to  a  reformation  of 
government  under  the  guidance  of  Japan,  when  the  latter  was 
determined  to  bring  about  such  reform  even  without  the  help 
of  China,  the  Korean  Government  suddenly  requested  Japan 
to  withdraw  her  troops,  the  action  having  been  taken  at  the 
suggestion  of  China,  who  was  always  working  behind  the 
s<  <  ins.  On  July  20,  the  Japanese  Minister  at  Seoul  dis- 
patched the  following  proposal  to  the  Korean  Government: 

1.  In  accordance  with  the  Seoul  Convention  of  1885  Korea 
shall  at  once  reconstruct  the  barracks  for  the  Japanese  guard. 

2.  The  Chinese  forces  now  stationed  in  Korea  under  guise 
of  protecting  her  as  a  dependency  shall  be  immediately  with- 
drawn, as  Korea  is  an  independent  country. 

3.  If  the  foregoing  proposals  are  not  complied  with  In- 
die 226  instant,  Japan  will  proceed  to  carry  out  reform  in 
Korea,  even  if  she  lias  to  resort  to  force  to  accomplish  it. 

The  Japanese  authorities  waited  until  the  23d;  and  as 
the    reply   demanded   was   not    forthcoming,    the    Japanese 


INTRODUCTION  1 9 

Minister  overpowered  the  Korean  guard,  forcibly  entered  the 
King's  palace  and  had  an  audience  with  the  monarch.  The 
King  carefully  explained  the  obstacles  that  had  thus  far 
impeded  reform,  expressed  gratitude  for  the  interest  Japan 
took  in  the  country,  and  pledged  himself  to  an  alliance  with 
Japan  as  against  China  for  the  reformation  of  Korea.  On 
the  26th  the  treaty  with  China,  which  acknowledged  Korean 
dependence  of  that  country,  was  repealed  and  a  decree  was 
issued  requesting  Japan  to  expel  from  the  peninsula  the 
Chinese  troops  stationed  at  Asan. 

While  these  proceedings  were  under  way  in  Seoul,  China 
was  trying  to  smuggle  her  Asan  troops  aboard  a  chartered 
English  transport  vessel  and  a  Chinese  warship,  the  K 
shing  and  the  Tsao-Kiang.  The  Tsi-yuen  and  the  Kwang-yi 
of  the  Peiyang  Squadron  were  to  receive  the  two  vessels  and 
were  steaming  boldly  out  of  Asan  Bay  when  they  met  the 
Japanese  warships  Yoshino,  Naniwa  and  Akitsushima,  which 
had  been  keeping  vigilant  watch  near  Phung  Island.  Tin 
Japanese  Government  had  not  yet  declared  war,  although  her 
men-of-war  had  been  preventing  the  enemy's  transportation 
of  troops,  so  the  Japanese  vessels  patiently  waited  without 
firing.  But  the  Chinese  ships  made  no  formal  signal  to  them, 
and  as  the  two  fleets  approached  closer  the  Tsi-yuen  sud- 
denly opened  fire  on  the  Yoshino.  Thus  the  Sino-Japanese 
War  began  at  Phung  Island  on  July  25,  1894.  With  surpris- 
ing  swiftness  the  Japanese  ships  closed  in  upon  the  Kwang-yi 
and  put  her  out  of  action,  forcing  her  into  shallow  water, 
while  the  Tsi-yuen  fled  to  Weihaiwei  with  main'  of  her  crew 
killed.  The  Kow-shing  was  sunk  and  the  Tsao-Kiang  cap- 
tured, so  that  victory  was  decisively  on  the  Japanese  side. 

The  Japanese  troops  invaded  and  conquered  Songhwan  on 
tin'  29th,  while  the  Chinese  troop-  at  Asan  escaped  without 
exchanging  a  shot.  On  August  1  the  Imperial  Government 
issued  a  declaration  of  war,  in  which  Japan  showed  clearly 
that  China  was  deliberately  taking  aggressive  measures  with- 
out considering  the  calamities  and  afflictions  that  would  fol- 
low in  tlu-  Orient.     The  following  is  ~in  extract: 


20  EXPENDIT1  RES   01    THE   SINO-JAPANESE    WAR 

Korea  is  an  independenl  tati  I  he  i  ountry  was  firsl  introduced  to  the  comity 
,,l  union-  on  the  advice  ol  and  under  the  guidance  of  Japan.  It  has,  however, 
been  the  li. 1 1  >i t  of  China  to  regard  Korea  as  a  dependency  of  her  own,  and  both 
openl)  and  secretly  to  interfere  in  her  affairs.  At  the  time  of  the  recent  civil 
disturbance  in  Korea,  <  hina  dispatched  troops  thither,  alleging  the  purpose  to 
be  tliat  of  affording  succor  to  a  suzerain  state  Japan,  by  virtue  of  the  treaty 
concluded  with  Korea  in  1882,  and  looking  to  possible  emergencies,  caused  a 
military  force  to  be  senl  to  that  country.  Desiring  to  procure  for  Korea  freedom 
from  the  calamity  of  perpetual  disorders,  and  thereby  to  maintain  the  peace  of 
tlic  Far  I 'ast  in  general,  Japan  in\  ited  the  cooperation  of  China  to  that  end.  But 
China,  advancing  various  pretexts,  declined  the  proposal.  Thereupon  Japan 
,\>\\  ised  Korea  to  reform  her  administration  so  that  she  might  be  able  to  preserve 
order  and  tranquillity  within  her  borders,  and  to  discharge  the  duties  and  respon- 
sibilities of  an  independenl  state  abroad.  Korea  had  already  consented  to  under- 
take the  task.  Bui  China  secretly  and  insidiously  endeavored  to  circumvent 
and  thwart  Japan's  purpose.  Furthermore  she  procrastinated  and  tried  to  make 
warlike  preparations  by  land  and  sea.  Completing  these  preparations,  she  dis- 
patched large  reinforcements  to  Korea  with  a  view  to  the  forcible  attainment  of 
her  anil  lit  ions  designs,  and  even  carried  her  arbitrary  attitude  and  insolence  to 
the  extent  of  opening  fire  on  Our  ships  in  Korean  waters.  Plainly  China's  object 
has  been  to  render  it  uncertain  where  the  responsibility  for  the  preservation  of 
peace  and  order  in  Korea  lies,  and  not  only  to  weaken  the  position  of  that  state  in 
the  family  of  nations  (a  position  obtained  for  Korea  through  the  efforts  of  Japan) 
but  also  to  obscure  the  significance  of  the  treaties  recognizing  and  confirming  that 
position.  Such  conduct  on  the  part  of  China  is  not  only  a  direct  injury  to  the 
rights  and  interests  of  the  Empire,  but  a  menace  to  the  permanent  peace  of  East 
Asia.  From  the  action  of  China  it  can  only  be  concluded  that  from  the  beginning 
thai  country  has  been  bent  on  sacrificing  peace  to  the  attainment  of  her  sinister 
object.  Under  these  circumstances,  ardent  as  is  our  wish  to  promote  the  prestige 
of  the  country  abroad  by  strictly  peaceful  means  and  methods,  we  find  it  impossi- 
ble to  avoid  a  formal  declaration  of  war  against  China.  It  is  Our  earnest  wish 
that  by  the  loyalty  and  valour  of  Our  faithful  subjects  peace  may  soon  be  perma- 
nentb  restored  and  that  the  glory  of  the  empire  may  be  augmented  and  ever 
stainless. 

Progress  of  the  Sino-Japanese  War 

The  historical  facts  with  regard  to  the  question  of  Korean 
independence  and  the  reformation  of  the  government  in  that 
country,  so  necessary  to  an  understanding  of  the  cause  of  the 
war  which  began  on  July  25,  1S94,  have  now  been  given  in 
outline.  The  struggle  continued  for  eight  months,  during 
which  time  Japan  won  a  number  of  decisive  victories  one 
after  another  and  was  soon  ready  to  march  upon  the  capital  of 
China.  Whereupon  the  latter  consented  to  peace  by  ceding 
territory  and  paying  an   indemnity,  while  Korea  was  made 


INTRODUCTION  2  1 

independent  of  foreign  interference,  peace  being  restored  on 
April  17,  1895. 

It  will  now  be  in  order  to  give  a  brief  review  of  the  progri 
of  the  war  with  China  and  to  indicate  the  causes  of  the  diplo- 
matic troubles  which  arose  after  the  war. 

From  the  outbreak  of  the  war  to  the  battles  of  Ping-yang  and 
the  Yellow  Sea 

The  battle  of  Phung  Island  on  July  25,  1894,  was  prepara- 
tory to  the  great  campaign  at  Ping-yang  and  the  decisive 
battle  of  the  Yellow  Sea.  The  three  Japanese  war-hip-,  the 
Yoshino,  a  cruiser  of  4,267  tons,  the  Akitsushinia,  a  cruiser  of 
3,150  tons,  the  Naniwa,  a  cruiser  of  3,709  tons,  forming  the 
First  Flying  Squadron  under  Rear  Admiral  Tsuboi,  had  been 
guarding  the  west  coast  of  Korea  against  Chinese  transports 
carrying  troops  to  Korea.  On  July  2^,  when  a  Japanese 
flying  column  consisting  of  the  above  ships  appeared  off 
Phung  Island,  southwest  of  Chemulpo,  the  Chinese  warships 
Tsi-yuen,  a  cruiser  of  2,355  tons  anc^  tnc  Kwang-yi,  a  gunboat 
which  came  from  Chemulpo,  came  into  view.  As  a  state  oi 
belligerency  had  not  yet  arisen  the  Japanese  commander 
naturally  expected  to  meet  the  Chinese  ships  with  the  ordinary 
formality,  but  to  his  great  surprise  the  Tsi-yuen  at  once  and 
without  warning  opened  fire  on  the  Yoshino  at  7.52  a.  m..  at  a 
range  of  about  3,000  meters.  Consequently  the  admiral  of 
the  Japanese  fleet  could  do  nothing  but  give  orders  to  return 
the  tire.  No  sooner  had  the  two  assailants  been  put  out  of 
action — the  Tsi-yuen  routed  and  the  Kwang-yi  driven  ashore 
— than  two  other  Chinese  ships,  the  Tsao-kiang  and  the  Kow- 
shing,  a  British  boat,  appeared,  the  latter  transporting  Chinese 
troops  bound  forAsan.  While  the  Akitsushima  was  capturing 
the  Tsao-kiang,  the  Naniwa  ordered  the  Kow-sking  to  stop, 
at  9.15  a.  m..  but  the  land  force  (.n  the  vessel  compelled  the 
captain  to  continue  the  course  back  to  Tako.  The  older  to 
stop  and  follow  the  Japanese  vessel  was  repeated  ses  era!  time-, 
but,  as  the  Kow-shing  took  n<>  notice  of  it.  the  Naniwa  pursued 
and  sank  her  at  1  p.m.     The  captain  and  others  were  rescued. 


EXPENDITURES   OB     ill!.    SINO-JAPANESE    WAR 

Another  battle  al  Songhwan  was  fought  on  July  29.  In 
accordance  with  the  requesl  of  the  King  of  Korea  on  the 
25th,  the  Japanese  Minister  Otori,  at  Seoul,  at  once  sent  for  a 
force  from  the  brigade  headquarters  at  Manriso  to  expel  the 
Chinese  troops  at  Asan.  The  force  proceeded  to  Soshajo, 
s<  ime  ma  enteen  miles  north  of  Asan  and  only  about  two  miles 
north  of  Songhwan,  where  the  enemy  had  established  them- 
selves  in  a  powerful  stronghold.  Songhwan  is  an  important 
town  on  the  Asan  road.  The  Japanese  brigade  captured  the 
place  in  short  order  while  the  troops  at  Asan  fled  without 
offering  resistance.  The  Japanese  force  participating  in  this 
action  consisted  of  four  infantry  battalions,  one  company 
each  of  cavalry,  artillery  and  engineers,  3,000  infantry,  47 
cavalrymen  and  8  guns.  The  Chinese  had  8  guns,  3,400 
nun  and  a  number  of  noncombatants.  The  enemy's  killed 
and  wounded  numbered  500,  the  result  of  63  shells,  191  rounds 
of  shrapnel  and  67,801  rounds  of  cartridges  fired  by  Japanese, 
while  the  latter  lost  33  killed  and  49  wounded. 

It  was  after  these  two  battles,  one  on  land  and  the  other  on 
sea,  that  the  Imperial  Proclamation  of  War  was  issued,  namely 
on  August  1,  and  the  Imperial  Army  headquarters  were  on 
September  13  moved  to  Hiroshima.  The  fact  has  already 
been  mentioned  that  prior  to  the  outbreak  of  war  the  Imperial 
Government  endeavored  to  settle  the  dispute  by  peaceable 
means,  dispatching  a  mixed  brigade  from  the  Fifth  Division 
to  Korea;  but,  seeing  the  hopelessness  of  such  an  attempt, 
the  government  abandoned  the  idea  with  the  report  of  the 
battle  of  Phung  Island  on  July  25. 

According  to  reports  reaching  the  Imperial  Government  the 
number  of  Chinese  troops  in  Korea,  mostly  around  Ping-yang, 
was  more  than  10,000  (including  those  that  had  fled  from 
Asan),  and  the  Mixed  Brigade  at  Seoul  was  rumored  to  be  in 
danger.  For  this  reason  the  remainder  of  the  Fifth  Army 
Division,  namely,  the  divisional  headquarters  and  the  Tenth 
Brigade,  was  ordered  to  Korea,  on  July  21,  and  on  August 
14  half  of  the  Third  Army  Division,  namely,  the  Fifth  Bri- 
gade, was  moved.     Landing  at  Fusan  and  Wonsan  they  at 


INTRODUCTION  23 

once  marched  on  Seoul.  Lieutenant-General  Michitsura 
Nodzu,  Commander-in-Chief  of  the  Fifth  Army  Division,  left 

Ujina  on  August  4,  reaching  Fusan  on  the  6th  and  Seoul  on 
the  1 8th.  The  Japanese  forces  already  in  Korea— namely, 
the  Third  and  Fifth  Army  Divisions — were  formed  into  the 
First  Army  under  General  Yamagata,  on  September  1,  with 
orders  to  drive  the  enemy  out  of  Korea;  but  until  the  arrival 
of  General  Yamagata  the  command  was  taken  by  Lieutenant- 
General  Nodzu,  the  Fifth  Divisional  Commander. 

As  to  the  Japanese  forces  already  in  the  peninsula,  the 
Oshima  Mixed  Brigade  was  at  Ryuzan  and  Rintsushin,  the 
Twelfth  Regiment  of  the  Tenth  Brigade  arrived  at  Wonsan 
on  August  8,  and  the  Fifth  Brigade  was  expected  there  on  the 
26th — the  former  called  the  Sakryong  detachment  and  the 
latter  the  Wonsan  detachment.  Half  of  the  Tenth  Brigade 
was  scheduled  to  be  at  Chemulpo  on  the  23d.  Consider- 
ing the  dispositions  of  the  troops  at  his  disposal,  Lieutenant- 
General  Nodzu  set  September  15  as  the  day  for  the  general 
attack  on  Ping-yang.  The  Oshima  Mixed  Brigade  was  or- 
dered to  lead  the  attack,  while  the  Sakryong  and  the  Won- 
san detachments  were  to  descend  from  the  north  and  the 
Main  I  )i\  ision  from  the  southwest,  the  total  attacking  force 
numbering  12,000  men  and  44  mountain  guns. 

The  Chinese  force  numbered  15.000  men  with  29  mountain 
guns,  4  field  guns  and  6  machine  guns,  protected  by  27  forts, 
15  on  the  south,  5  outside  of  Taidong  gate,  4  on  the  north 
hill  without  the  wall  and  3  on  Mount  Peony.  The  enemy 
put  up  an  exceedingly  stiff  defense,  aided  by  the  natural  fast- 
ness « »f  the  castled  forts. 

Against  these  fortresses  and  defense  works  the  Japai 
troops  fought  arduously,  and  finally  succeeded  in  routing  the 
enemy,  the  Sakryong  and  Wonsan  detachments  occupying 
Mount  Peony  after  making  desperate  attempts  to  storm  it. 
The  stronghold  fell  on  the  16th,  the  Japanese  having  lost  180 
killed  and  500  wounded,  and  having  fired  680  common  shells, 
2,128  shrapnel  and  284,869  rounds  of  ammunition.  The 
Chinese  losses  were  2,000  men,  including  General  Tso-Paok- 


2  |  EXPENDITURES   <  >!■    THE    SINO-JAPANESE    WAR 

wai.  w  hile  <><><>  were  taken  prisoners.     Thus  in  two  (lays  Japan 
completely  demolished  China's  foothold  in  Korea. 

On  sea  the  anus  of  Japan  were  also  decisively  victorious. 
On  September  12  the  Japanese  squadron  got  wind  of  the 
present  e  of  the  Chinese  squadron  which  was  guarding  trans- 
ports near  the  Taidong  and  the  Yalu  Rivers,  and  on  the  14th 
the  Main  Squadron  consisting  of  the  Matsushima,  the  Chiyoda, 
the  Fuso,  the  Itsuku-shima,  the  Hiyei  and  the  Ilashidate,  with 
the  first  Flying  Squadron  comprising  the  Yoshino,  the  Taka- 
chiho,  the  Naniwa  and  the  Akitsushima,  the  third  Flying 
Squadron  comprising  the  Tsukushi,  the  Akagi,  the  Maya  and 
the  Chokai,  together  with  a  torpedo  flotilla  including  the 
Kotaka,  No.  22,  No.  12  and  the  torpedo-depot-ship  Yamas- 
hiro,  accompanied  by  the  Kaimon,  the  Iwaki,  the  Amagi  and 
the  auxiliary  cruiser  Saikyo,  all  proceeded  toward  Taidong 
and  arrived  at  the  mouth  of  river  on  the  15th.  But  finding 
no  hostile  ship  there,  the  fleet  left  the  Tsukushi,  the  Maya 
and  the  Chokai  as  well  as  the  torpedo  flotilla,  the  Iwaki  and 
the  Amagi  at  the  river's  mouth  and  set  out  northward.  The 
contending  fleets  met  on  the  17th  off  Tamushan,  when  a  brisk 
act  ion  of  several  hours  ensued,  lasting  until  dark.  The  Chinese 
fleet  consisted  of  the  Ting-yuen  and  the  Chen-yuen  in  the  cen- 
ter, followed  by  the  King-yuen,  the  Sai-yuen, the  Ping-yucn, 
the  Chih-yuen,  the  Lai-yuen,  the  Yang-wei,  the  Tsi-yuen,  the 
Chao-yung,  the  Kwang-chia,  the  Kwang-ping  and  three  torpedo 
boats,  the  total  displacement  being  34,420  tons  with  a  speed 
of  from  11  to  18  knots.  The  Chinese  had  quick-firing  guns, 
70  below  30  c.  m.  and  9  below  12  c.  m.,  as  well  as  about  129 
machine  guns,  and  31  torpedo  tubes  and  two  torpedo  boats. 
The  Japanese  squadron,  with  the  exception  of  the  Saikyo, 
consisted  of  11  ships  representing  36,771  tons,  with  a  speed 
of  from  [3  to  22  knots,  equipped  with  246  guns,  44  below 
33  c.  m.,  [90  quick-firers  below  15  c.  m.,  29  machine  guns  and 
37  torpedo  tubes.  Thus  the  Japanese  fleet  was  superior  in 
tonnage,  -peed  and  number  of  guns.  Fighting  with  brilliant 
dash  and  courage  the  Japanese  succeeded  in  sending  the 
Chao-yung,  the  Chih-yuen  and  the  King-yuen  to  the  bottom, 


INTRODUCTION 


^0 


while  the  Yang-wei  was  set  on  fire  and  the  Kwang-chia  blown 
up,  the  rest  of  the  enemy's  fleet  suffering  great  damage.  The 
Japanese  lost  not  a  single  ship  and  had  only  279  casualtii 

The  Chinese  Peiyang  Squadron  was  not  completely  de- 
stroyed in  this  battle,  but  it  was  practically  disabled  and 
deprived  of  fighting  strength,  without  further  power  over 
Korean  or  home  waters.  Japan,  on  the  contrary,  obtained 
complete  freedom  of  the  seas,  for  transporting  troops  and 
provisions  to  China  without  much  fear  of  molestation.  By 
these  two  actions  on  land  and  sea  China  entirely  lost  her  hold 
on  Korea,  while  Japan  saw  before  her  a  clear  path  by  way  of 
the  province  of  Shingking  to  the  capital  of  China.  The  progn  iss 
of  the  war  having  thus  early  taken  such  a  favorable  turn,  the 
spirits  of  the  Japanese  were  correspondingly  animated. 

Parallel  advance  of  the  first  and  second  armies  and  the  sieges  of 
Haicheng  and  Port  Arthur 

The  first  army  in  Korea  was  now  instructed  by  the  Impe- 
rial headquarters  to  expel  all  Chinese  forces  from  Korea,  and 
to  obtain   full    control    of    Kiuliencheng,    Fenghuangcheng, 
Haicheng  and  Liaoyang,  and  to  form  another  army  to  take 
possession  of  Port  Arthur  and  Weihaiwei  so  as  to  prepare 
for  a  decisive  campaign  in  the  territory  of  Liaotung  with  the 
coming  of  the  spring  of  the  next  year.    In  preparation  for  this 
invasion  of  Chinese  territory  General  Yamagata  had  been  ap- 
pointed commander-in-chief  of  the  Firsl  Army  Corps,  so  called 
to  distinguish  it  from  the  other  at  Pyenyang.     General  <  K  ama 
was  appointed  commander-in-chief  of  the  Second  A  run  ( )orps 
on  the  day  the  welcome  tidings  of  victory  reached  Imperial  head- 
quarters, and  the  two  army  corps  were  organized  as  follow s: 
First  Army  Corps 
Commander-in-chief:    General  Count  Yamagata 
Third  Provincial  I  division 
Fifth  Brigade 

Sixth  and  Eighteenth  Regiments 
Sixth  Brigade 

Seventh  and  Nineteenth  Regiments 


26  EXPENDIT1  RES   OF   THE   SINO-JAPANESE    WAR 

Fifth  Pro  incial  I  >i\  Lsion 
Ninth  Brigade 

Eleventh  and  Twenty-First  Regiments 
Tenth  Brigade 

Twelfth  and  Twenty-Second  Regiments 

Second  Army  ( )orps 

Commander-in-chief:     General  Count  Oyama 
First  Provincial  I  )ivision 

First  Brigade 

Firsl  and  Fifteenth  Regiments 
Second  Brigade 

Second  and  Third  Regiments 
Sixth  Provincial  Division 
Twelfth  Mixed  Brigade 

Fourteenth  and  Twenty- Fourth  Infantry  Regi- 
ments 
Second  Provincial  Division  (did  not  take  part  in  battle 
of  Kinchow) 
Third  Brigade 

Fourth  and  Sixteenth  Regiments 
Fourth  Brigade 

Fifth  and  Seventeenth  Regiments 
Special  Besieging  Corps   (temporarily  dismounted  artil- 
lery regiment) 

h  provincial  division  included  two  infantry  brigades, 
one  battalion  each  of  cavalry,  engineers,  ammunitionists  and 
transport  men,  one  regiment  of  field  artillery,  with  field  tele- 
graph corps,  stretcher-bearers,  medical  corps  and  communi- 
cation equipment. 

The  Tenth  Brigade  of  the  First  Army  attacked  and  reduced 
Wiju  on  the  left  bank  of  the  Yalu  River,  completing  their 
task  by  October  17,  while  the  Hooshan  fortress  fell  on  the 
25th  and  on  the  26th  the  Chinese  abandoned  Antung  and 
Kiuliencheng  without  combat,  thus  placing  all  Chinese  de- 
fenses  along  the  Korean  boundary  in  the  hands  of  Japan. 
Although  the  Chinese  had  at  Kiuliencheng  no  less  than  19,750 


INTRODUCTION  2J 

troops,  with  8 1  guns,  to  Japan's  13,000  infantry,  350  cavalry 
and  78  guns,  they  were  nevertheless  so  dispirited  by  the 
defeat  at  Hooshan  that  they  fled  from  the  castle  without 
offering  resistance.  The  Japanese  casualties  at  Hooshan  were 
149;  they  fired  493  shells  and  99,950  rounds  of  ammunition, 
and  captured  78  guns  with  4,400  rifles. 

After  the  fall  of  Kiuliencheng  on  October  26  the  Japanese 
forces  divided  into  two,  the  Fifth  Division  marching  on  Feng- 
huangcheng  and  the  Third  Division  on  Takushan,  across  the 
Tatungkow.  The  enemy  set  fire  to  and  evacuated  Feng- 
huangcheng  on  the  29th;  the  Third  Division  captured  Tatung- 
kow on  the  27th  and  Takushan  on  November  5,  and  on  the 
8th  it  came  into  direct  communication  with  the  Second  Army 
Corps.  Advancing  from  Takushan,  the  Third  Army  Divisi.  m 
overwhelmed  Yungancheng  on  November  18,  fought  an 
important  battle  near  Taohotsuon  December  11  and  cap- 
tured Chaimucheng  on  the  following  day.  The  same  force 
reduced  Haicheng  on  the  13th  and  thus  opened  the  road 
between  Kaiping  and  Liaoyang.  As  the  fall  of  Haicheng  was 
so  vital  to  the  Chinese,  they  made  repeated  counter  attacks 
for  the  recovery  of  the  fort,  a  fierce  battle  ensuing  on  Decem- 
ber 19  at  Konwasai  near  this  castle.  The  Japanese  force 
engaged  numbered  3,960  with  30  guns,  Vihile  the  Chinese 
numbered  9,200,  with  6  field  batteries  protected  by  natural 
strongholds.  The  battle  lasted  five  hours,  reddening  the 
fallen  snow.  After  five  bayonet  charges  the  Japanese  troops 
forced  the  enemy  to  surrender,  but  only  when  on  our  side  69 
had  fallen  and  339  been  wounded.  The  number  of  shells 
tired  was  1,383  and  rounds  of  ammunition  (.5,241.  The  suc- 
cessive and  decisive  victories  of  the  First  Army  Corps  gave 
greater  freedom  for  activity  and  achievement  to  the  Second 
Army  Corps. 

To  the  Second  Army  Corps  had  been  entrusted  the  reduc- 
tion of  Port  Arthur,  assisted  by  the  First  Army  and  the  fleet. 
Between  October  24  and  26  the  First  Division  succeeded  in 
safely  landing  at  Huayuankow.  Though  Tatungkow  and 
Takushan  had  not  fallen  at  that  time  their  fate  was  too  well 


28  I  XPENDIT1  RES   01    THE    SINO-JAPANESE    WAR 

a  in. . I  For  much  attention  to  be  given  them.  Consequently, 
the  Firsl  Army  was  allowed  to  proceed  with  its  mission  alone, 
and  the  Firsl  Army  Division  faced  the  stronghold  of  Port 
Arthur.  On  the  6th  the  force  captured  Kinchow-ching  on 
the  way,  driving  the  enemy  into  the  road  to  Port  Arthur. 
Most  of  tlif  batteries  near  Talien  Bay  were  silenced  on  the 
7th  by  this  First  Division  while  the  First  and  Second  Armies 
came  into  direct  communication  on  the  following  day  and 
reached  the  point  of  attacking  Port  Arthur.  With  the  fall  of 
the  1  latteries  around  Talien  Bay,  the  commander-in-chief  of 
the  Second  Army  moved  its  disembarking  headquarters  from 
Huayuankow  to  Talien  Bay.  The  Mixed  Twelfth  Brigade, 
landing  at  1  [uayuankow  on  November  7,  was  now  brought  to 
the  army,  in  preparation  for  a  general  assault  upon  Port 
Arthur.  On  the  13th  the  number  of  the  hostile  garrison  was 
estimated  at  about  12,000,  besides  some  at  Poolanteen,  at  the 
rear  of  the  main  fort ;  but  it  was  thought  that  the  First  Divi- 
sion and  the-  Mixed  Brigade  with  the  Special  Besieging  Corps 
would  be  sufficient  for  the  reduction,  without  seeking  the  aid 
of  the  Second  Division.  The  date  of  the  attack  was  fixed  for 
November  21. 

Port  Arthur  was  guarded  on  its  eastern  shore  by  Huang- 
chinshan  and  attendant  forts,  with  Mantonshan,  11 1  meters 
high,  and  several  other  forts  on  the  western  shore,  while 
Sungshushan,  103  meters  high,  and  Erhlungshan,  82  meters, 
with  Chihuanshan,  126  meters,  and  Itzushan,  protected  the 
land  approaches.  Thus  by  these  forts,  a  strong  wall  and 
[2,000  troops  the  fortress  was  well  protected.  Indeed  the 
place  seemed  almost  impregnable. 

The  First  Division  of  the  attacking  force  was  ordered  to 
assail  torts  Sungshushan  and  Itzushan,  while  the  Mixed 
Twelfth  Brigade  was  given  the  task  of  reducing  Erhlungshan 
and  Chihuanshan.  After  some  sanguinary  onsets  Fort  Itzu- 
shan was  captured  at  7  a.  m.  on  the  21st,  then  Sungshushan 
and  again  Erhlungshan  by  1  [.30  a.  m.  The  defenses  from  the 
rear  having  been  thus  reduced  the  First  Division  had  no  dif- 
ficulty in   taking   Port   Arthur  in  the  afternoon.     The  shore 


IN  1  RODIN   i  [ON  29 

fortresses  of  Huangchinshan  and  Mantoshan  held  out  a  little 
longer,  but  by  the  late  afternoon  and  following  morning  they 
too  had  been  silenced,  and  on  the  226  the  flag  of  the  Rising 
Sun  floated  over  the  battlements  of  Port  Arthur. 

The  forees  which  accomplished  this  great  achievement  con- 
sisted of  15  infantry  battalion-  representing  59  companies,  3 
squadrons  of  cavalry,  4  companies  of  sappers,  6  batteries 
of  artillery  with  30  guns  and  8  batteries  of  field  artillery 
with  48  guns;  it  was  found  that  the  Chinese  participat- 
ing were  9,500  on  the  land  side  with  18  pieces  of  heavy 
artillery,  48  lighter  guns  and  19  machine  guns,  while  on  the 
water  front  3,200  men  were  engaged  with  the  assistance  of  58 
heavy  ordnance,  8  lighter  guns  and  5  machine  guns,  most  of 
the  force  finally  escaping  to  Kinchow.  The  Japanese  forces 
suffered  288  casualties,  firing  247  shells,  1,526  shrapnel  and 
179,562  rounds  of  ammunition. 

Capture  oj  Weihaiwei,  in  vicinity  of  Yingkotu  and  the 
Pescadores 

During  the  siege  of  Port  Arthur  the  enemy  made  repeated 
attacks  upon  Kinchow-ching,  which  was  a  Japanese  suppi  irting 
point  and  guarded  by  only  3  infantry  battalions  and  a  section 
of  cavalry.  The  attacks  upon  the  supply  depot  on  the  fol- 
lowing day  by  the  enemy  that  had  tied  from  Port  Arthur 
were  also  successfully  repelled  and  proved  no  obstacle  to 
the  main  siege.  On  the  same  day  this  repulse  was  made, 
China  intimated  through  the  American  Minister  her  desire 
for  the  cessation  of  war. 

A  part  of  the  Firsl  Division  of  the  Second  Anns-  Corps 
captured  Poolanteen  and  Foochou  on  December  6,  while  the 
First  Brigade  oi  the  Firsl  Division  took  Kaiping  on  January 
10,  previous  to  which  the  Third  Division  of  the  Firsl  Army 
had  taken  Haicheng,  on  December  [3.  Thus  during  the 
firsl  half  of  January,  [895,  the  Third  Division  of  the  hirst 
Army  Corps  maintained  full  control  of  Haiching;  and  the 
Firsl  Brigade  ol  the  Second  Army  Corps  at  Kaiping  swept 
the  whole  southeast  area.     As  the  Chinese  forces  were  driven 


30  EXPENDIT1  RES   01    THE   SINO-JAPANESE    WAR 

Lack  toward  the  line  of  Yingkow,  Niuchwang  and  Tien- 
chwangtai  w  it li  Liaoyang  at  the  right  flank,  they  concentrated 
i heir  nun  along  this  line  and  on  Haicheng  and  made  three 
furious  attempts  to  regain  it  on  January  17  and  22  and  Feb- 
ruary 16.  A  point  had  now  been  reached  where  the  two 
fortes  were  face  to  face  for  the  decisive  issue. 

The  Imperial  headquarters  had  organized  a  flying  column 
consisting  of  the  Eleventh  Brigade,  being  the  Thirteenth  and 
Twenty-third  Regiments,  taken  from  the  Second  and  Sixth 
I  Y<  >\  incial  1  )i\  ision  of  the  Second  Army  Corps,  which  together 
with  an  artillery  battery  was  dispatched  on  and  after 
January  10,  for  the  purpose  of  landing  at  Yungching  on 
January  20  and  attacking  Weihaiwei,  where  the  remnant  of 
the  Peiyang  Squadron  had  been  taking  refuge.  Landing  at 
Yungching  on  the  20th,  the  forces  at  once  faced  about  for 
Motienling  and  Huanglinchi,  the  former  an  elevation  east- 
ward of  the  entrance  to  the  bay  of  Weihaiwei,  facing  the 
islands  of  Liukung  and  Jih.  The  force  had  four  24  c.  m.  guns, 
besides  64  heavy  guns  under  24  c.  m.,  which  it  placed  on  the 
surrounding  heights  of  Motienling;  it  received  vigorous  assist- 
ance from  the  Chinese  fleet  in  the  bay.  The  Japanese  attack 
lasted  but  four  hours,  however,  when  the  fortress  yielded,  the 
only  remaining  positions  being  the  forts  on  the  islands  and  in 
Weihaiwei  itself.  Our  forces  swept  all  the  fortresses  around 
the  city  of  Weihaiwei  on  February  2,  and  by  the  12th,  as  the 
result  of  the  joint  action  of  the  army  and  navy,  every  Chinese 
ship  in  Weihaiwei  had  surrendered,  and  the  Japanese  forces 
were  complete  masters  of  Weihaiwei. 

The  Chinese  forces  participating  in  this  part  of  the  cam- 
paign numbered  12,000  troops,  and  15  warships  of  the  Peiyang 
Squadron  aggregating  30,250  tons.  The  warships  were 
transferred  to  Japanese  command  and  the  captured  crews 
were  delivered  under  pledge  as  noncombatants.  Having 
accomplished  its  task  so  successfully  most  of  the  Japanese 
force  in  Shangtung  returned  to  the  peninsula  of  Kinchow  by 
March  1. 

During  the  middle  of  February  the  Third  Division  of  the 


INTRODUCTION'  3 1 

First  Army  which  had  been  left  on  guard  at  Haicheng,  and 
the  Fifth  Division  of  the  First  Army,  which  had  been  left  at 
Kiuliencheng,  braved  the  freezing  temperature  and  marched 
north,  capturing  Anshantan  on  March  2  and  Niuchwang  on 
the  4th.  The  First  Division  of  the  Second  Army  at  Kinchow 
also  invaded  Yingkow  and  took  it  on  the  6th,  and  then  these 
detachments  of  the  two  army  corps  reunited  and  approached 
Tienchwangtai. 

The  Japanese  forces  taking  part  in  the  siege  of  Tiench- 
wangtai consisted  of  the  First.Third  and  Fifth  Army  Divi- 
sions, involving  21  infantry  battalions,  6  companies  of  cav- 
alry, 14  batteries  of  field  artillery  and  5  companies  of  engineers 
with  54  field  guns,  30  mountain  batteries  and  7  mortars.  The 
total  force  numbered  more  than  19,000.  This  was  the  largest 
force  participating  in  any  single  battle  of  the  campaign  on 
the  Japanese  side.  The  attack  opened  on  March  9  simul- 
taneously from  three  directions,  the  Third  Division  occupying 
the  center,  with  the  Fifth  on  the  right  and  the  First  on  the 
left.  The  enemy  numbered  more  than  20,000,  with  40  gun-. 
and  they  put  up  an  exceedingly  stubborn  defense.  But  it 
was  impossible  to  resist  the  terrific  onset  of  the  Japanese 
forces  from  three  sides,  and  the  fort  was  taken  on  the  very 
day  of  the  attack.  After  this  defeat  the  Chinese  lost  all  hope 
of  regaining  Port  Arthur,  a  hope  which  they  had  ardently 
cherished  since  their  first  attack  on  Haicheng.  The  com- 
bined operations  of  the  First  (Third  and  Fifth  Divisions)  and 
Second  (First  Division)  Army  Corps  were  then  completed  for 
the  present  and  they  began  to  plan  a  campaign  in  the  direc- 
tion of  Chihli. 

The  Imperial  headquarters  in  the  meantime  had  already 
planned  for  the  occupation  of  the  Pescadores,  even  before 
the  capture  of  Weihaiwei.  For  this  purpose  an  expedition 
southward  was  planned,  and  as  soon  as  the  enemy's  fleel  was 
no  more  and  Japan  was  master  of  the  (  lull"  of  Pechili,  a  mixed 
column  of  3  battalions  and  a  mountain  battery  left  Sasebo  on 
March  15,  convoyed  by  the  Southern  Squadron,  which  had 
been  commissioned  for  the  purpose,  consisting  of  the  Mat- 


j2  EXPENDITURES   OF    THE    SINO-JAPANESE    WAR 

.sushi mil,  the  Hashidate,  the  Itsukushima,  the  Chiyoda,  the 
Yoshino,  the  Naniwa,  the  Takachiho,  the  Akitsushima  and 
the    Zstt&i.     The    islands   were-   duly   occupied. 

Preparations  for  attack  on  Peking 

It  will  be  seen  that  Japan  became  master  of  the  Gulf  of 
Pechili  on  September  17,  1894,  as  the  result  of  the  Yellow 
Sea  fight,  and  Port  Arthur  on  November  22,  and  was  in  pos- 
session of  the  whole  territory  east  of  the  Liao  River  by  March 
9,  1895.  The  Peiyang  Squadron  was  vanquished  on  Feb- 
ruary 12,  1895,  and  Weihaiwei  taken;  and  as  the  Pescadores 
yielded  on  March  26,  nothing  remained  to  prevent  Japan 
from  transporting  her  forces  across  the  Gulf  of  Pechili.  In 
the  early  days  of  March  the  Imperial  headquarters  pro- 
jected a  campaign  into  the  province  of  Chihli  by  reorganiz- 
ing the  various  army  corps  already  mentioned.  The  Second 
Army  Corps  was  to  include  the  Imperial  Guards,  the  Second, 
the  Fourth  and  Sixth  Divisions,  and  it  was  to  concentrate  its 
main  efforts  on  the  taking  of  Shanhaikwan.  The  First  Army 
Corps,  including  the  First,  Third  and  the  Seventh  Extraordi- 
nary Divisions,  was  commanded  to  march  into  and  occupy 
the  plains  of  Chihli.  Thus  the  entire  force  consisted  of  seven 
divisions  with  about  one-third  of  the  whole  second  reserve. 
Although  this  force  had  to  meet  a  Chinese  army  of  more  than 
200,000  it  nevertheless  felt  superior,  as  it  doubtless  was,  in 
( omparison  of  numbers. 

11.  I.  H.  General  Prince  Komatsu,  Chief  of  the  General 
Staff,  was  appointed  commander-in-chief  of  the  reorganized 
army,  and  was  to  have  left  Ujina,  a  port  near  Hiroshima,  on 
April  [3,  establishing  his  headquarters  at  Shanghaiwan  when 
taken,  and  from  there  to  promote  the  attack  on  Peking.  All 
such  plans  were  then  suddenly  arrested  by  the  arrival  of  pro- 
posals of  peace. 

Reconciliation 

The  first  suggestion  of  such  a  proposal  came  on  November 
22,  the  date  of  the  attack  on  Port  Arthur,  but  it  ended  fruit- 


INTRODUCTION  33 

lessly.  China  sent  a  representative  to  open  negotiations  on 
January  31,  1895,  but  there  being  some  defei  t  in  his  commis- 
sion, leaving  him  without  full  powers,  no  conference  could  be 
held  and  he  returned  to  Peking.  On  March  14  Li  Hung 
Chang  came  to  Shimonoscki  as  the  fully  accredited  repre- 
sentative, and  negotiations  were  opened  on  the  20th ;  a  treaty 
of  peace  was  signed  on  the  17th  of  April,  the  exchange  of  ratifi- 
cations taking  place  on  May  8.  By  this  treaty  (  nina  agreed 
to  recognize  the  independence  of  Korea,  to  cede  Formosa,  the 
Pescadores  and  the  Liaotung  peninsula  to  Japan,  to  open  the 
ports  of  Shashih,  Chungking,  Soochow  and  Hangchow  to 
Japanese  commerce  and  to  pay  to  Japan  an  indemnity  of 
200,000,000  taels.  Thus  Japan's  aim  in  opening  the  war  was 
attained  and  peace  was  restored  in  the  Orient. 

After  Japan's  occupation  of  the  Formosan  Island  the  natives 
became  more  restive  than  before.  Consequently  the  govern- 
ment dispatched  the  Imperial  Guards  and  the  Fourth  Divi- 
sion, which  carried  out  expeditions  in  various  parts  of  the 
island  for  the  subjugation  of  the  savages  and  of  the  rebellious 
elements.  This  operation,  however,  need  not  be  further 
dwelt  upon,  since  it  formed  no  real  part  of  the  Sino-Japanese 
War. 

Unreasonable   interference  by   Russia,   Germany   and    France: 
political  turmoil  in  the  Far  East 

But  scarcely  had  peace  been  restored  when  Japan  had  to 
face  and  submit  to  partiality  and  injustice,  011  April  23,  on 
tin-  pari  of  Russia,  Germany  and  France,  in  being  obliged  to 
abandon  the  Liaotung  peninsula,  on  the  pretexl  that  her 
occupation  of  continental  territory  would  be  prejudicial  to 
the  peace  of  the  Orient.  Japan  had  purchased  it  with  the 
tears  and  the  blood  of  her  son-,  but  she  was  compelled  to 
relinquish  it  for  nothing.  So  potenl  a  three-fold  interferes  e 
she  was  not  prepared  to  resist.  By  this  action  Japan  was 
humbled  to  the  dust,  a  fact  which  it  is  well  to  note  carefully. 
The  three  powers  contended  that  the  peninsula  under  the 
Japanese  Hag  would  prove  a  constanl   source  of  trouble  in 


34  EXPENDIT1  RES   OF   THE   SINO-JAPANESE    WAR 

Eas1  Asia.  Japan  yielded  and  abandoned  the  Liaotung  pen- 
insula on  May  [0  and  the  three  powers  had  their  way.  But 
did  matters  remain  as  they  had  contended  they  would?  They 
ousted  Japan  and  walked  into  her  possessions  themselves. 
( Germany  leased  by  force  the  Bay  of  Kiaochow  on  March  6, 
[898,  Russia  leased  Port  Arthur  and  Talien  on  March  27  of 
the  same  year,  and  on  June  1  Britain  got  Weihaiwei.  France 
could  not  be  left  out,  and  she  got  a  treaty  signed  to  lease 
Kwangchow  Bay  on  November  16  of  the  following  year. 
Thus  the  four  powers,  under  pretext  of  leasing  bases,  started 
the  disintegration  of  China.  It  was  indeed  a  shrewd  and 
ingenious  means  of  snatching  the  prize  which  Japan  had  pur- 
chased with  her  blood  and  was  soon  after  forced  to  forswear. 
In  name  it  was  an  act  of  leasing;  in  reality  it  was  an  act  of 
occupation.  We  have  no  desire  to  misrepresent  or  to  confuse 
issues,  but  to  state  the  simple  truth  as  to  the  action  of  the 
powers.  It  is  the  practical  rather  than  the  theoretical  side 
of  the  matter  that  Japan  has  to  consider.  She  must  be  gov- 
erned by  facts,  not  by  names.  It  was  indeed  something 
Japan  found,  and  still  finds,  impossible  to  understand:  that 
these  powers  should  have  compelled  her  to  relinquish  her  new- 
possession  and  then  have  proceeded  to  occupy  it  themselves. 


CHAPTER  II 
DISBURSEMENTS  OF  THE  WAR 

General  Survey  of  Expenses 

The  Sino-Japanese  War  opened  on  July  25,  1894,  when 
Japanese  warships  were  fired  upon  in  the  Hoto  offing;  and 
peace  was  restored  by  the  Treaty  of  Shimonoseki,  signed  on 
April  17  of  the  next  year.  The  space  of  war  time  extended 
about  nine  months  (including  the  Formosan  expedition) .  The 
number  of  officers  and  men  participating  on  the  Japanese  side 
was  more  than  240,000,  together  with  some  6,495  civil  officials 
and  officers  and  some  100,000  laborers.  The  number  of  war- 
ships engaged  was  28,  representing  a  displacement  of  over 
57,600  tons,  with  24  torpedo  boats  aggregating  1,475  tons. 
The  theater  of  operations  extended  about  268  miles  east  and 
west,  and  some  1,269  miles  north  and  south,  covering  about 
14,280  square  miles  of  battleground  in  Manchuria,  18,445 
square  miles  in  Korea,  892^  square  miles  in  Shantung  and 
5,652!  square  miles  in  Formosa,  or  about  39,270  square  miles 
in  all.  As  it  was  an  oversea  war,  the  cost  was  comparatively 
large.  The  total  outlay  has  been  put  down  at  235,866.0.^ 
yen,  the  period  of  disbursement  running  from  1894  to  1903, 
as  tabulated  on  the  following  page. 

The  actual  total  outlay  for  the  war  came  to  233,523,252 
yen,  including  the  sum  of  135-553  yen  spent  after  [903,  which 
will  be  accounted  for  later  on.  The  total  may  be  tabulated 
under  (1)  War  Office,  194,777,467  yen  and  (2)  Naval  Office, 
38,745,785  yen. 

Moreover,  administrative  expenses  arising  out  of  the  war 
increased  the  outlay  l>y  2,47s, ^54  yen,  bringing  the  total  up 
to  236,001,606  yen,  which  will  be  analyzed  according  to  dis- 
bursements in  due  course. 

35 


36 


EXPENDITURES  OF  THE    SINO-JAPANESE   WAR 


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DISBURSEMENTS   OF   THE    WAR 


37 


Cost  of  the  War 

The  total  amount  of  actual  expense  for  the  Sino-Japanese 
War  has  been  set  down  above  at  the  figure  of  233,523,256  yen, 
which,  as  has  already  been  stated,  represents  the  outlay  by 
army  and  navy  from  June  1,  1894,  which  was  before  the  war 
broke  out,  to  March  31,  1896,  together  with  certain  further 
disbursements  after  the  war  for  readjustment  of  affairs  en- 
tailed by  the  war,  compilation  of  war  history  and  sundries. 
The  outlay  in  detail  of  the  War  and  Navy  Departments  may 
be  seen  from  the  following  tables: 

Expenditures  of  War  Office,  1894-1903" 


Fiscal 
years 

Extraordinary 

military 

affairs 

After-war 
adjustments 

Compilation 
of  war 
history 

Grant  of 
lump  sum 

Total 

1894  \  .... 

1895/  •••• 
1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 

Yen 
164,520,371 

20,415,279 

5.915.563 

3,025,960 

22,136 

4.795 

67 

Yen 

56,548 

35.766 

19,560 

9,836 

Yen 

50,540 
50,695 

42,593 
31,810 

43,845 

Yen 
1-^5,197 

82.4M, 

123,689 
37,108 
28,070 

1  'r  /: 
164,520,37] 

2O.4i5.279 

5,915.563 

3,025,960 

254.421 

173.742 

78,754 
71,915 

Total .  .  . 

193.904,171 

121,710 

219.483 

396,550 

194,641,914 

a  Between  the  years  1904  and  1913  additional  expenses  in  relation  to  the  war  were  incurred  as 
follows: 

1 

Compilation  of  War  History  and  Statistics 

Grant  of  lump  sum 74. 1  -'4 

Total U5.55I 

When  this  outlay  is  added  to  tin-  total  outlined  above,  the  grand  total  for  the  Wai  1  >ffice  will  be 
194.777,468  yen. 


J^  /'{MS 


;VS  EXPENDITURES   OF   THE   SINO-JAPANESE  WAR 

Expenditures  of  Naval  Office,  i  894-1902 


Fiscal 
years 

Extraordinary 

war  funds 

Compilation  of 
war  history 

Lump  sum 
grant 

Total 

1895  1  

1896 

Yen 

35.955.137 

[,449.76o 

608,260 

3H.744 
122,585 

253.513 
1,602 

Yen 
3.094 

Yen 

34.327 

i,43i 

205 

1,101 

30 

Yen 
35,955,137 
1,449,760 

1897 

608,260 

1898 

349WI 

1899 

124,016 

1900 

256,812 

[QO]      

2,703 

1 902 

30 

Total 

38,705,601 

3,094 

37,094 

38,745,789 

Analyzing  the  accounts  of  the  War  Office  and  the  Naval 
Office,  the  items  include  arms,  ammunition,  supplies  for 
troops  and  transportation  of  troops  and  provisions,  as  follows: 

Details  of  Expenditures  of  War  and  Naval  Offices 


Items 

War  Office 

Naval  Office 

Total 

Yen 
32,603,214 
91,979,606 

4i,37i,365 

27,949,985 

873,297 

Yen 
31,850,170 
3,980,079 

1,308,760 

1,566,588 

40,188 

Yen 
64,453,384 

Supplies  for  troops 

Transportation  of  troops  and  pro- 

95,959,685 
42,680,125 

Accessories  to  cost  of  war 

29,516,573 
9!3,485 

Total 

194,777,467 

38,745,785 

233,523,252 

The  above  items,  omitting  those  already  explained,  are  fur- 
ther analyzed  in  the  tables  on  pages  39-42. 


DISBURSEMENTS   OF    THE    WAR 


39 


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disbursements  of  the  war  43 

Increase  of  Administrative  Expenses  Due  to  the  War 

As  already  mentioned,  the  total  increase  of  administrative 
expenses  directly  caused  by  the  Sino-Japanesc  War  was 
2478»354  yen>  disbursed  as  follows: 

Yen 

Foreign  Office 307,831 

Home  Office 414,564 

Treasury  Office 1 ,614,246 

Judicial  Office 764 

Communications  Office 140,949 

Total 2,478,354 

The  above  expenses  were  only  a  little  over  10.5  per  cent  of 
the  total  cost  of  the  war;  and  the  items  of  expense  in  detail  for 
the  above  offices  are  tabulated  on  pages  44-46. 

An  extraordinary  session  of  the  Imperial  Diet  was  con- 
vened in  October,  1894,  at  Hiroshima  near  the  Imperial 
headquarters,  and  extra  rewards  were  given  to  contributors 
to  the  war  fund  in  money  or  materials  and  to  those  who 
relieved  distressed  families  of  soldiers  at  the  front. 


44  EXPENDITURES   OF     Mil.    SI  NO-JAPANESE   WAR 

Expenses  of  Foreign  Office 


Items 

1894 

1895 

Total 

Yen 

18,981 

8,432 
7.174 

3.240 

11,125 

1,461 
194,065 

)'<  n 

6,927 

6,013 

12,941 

2,016 

23.472 

1.550 

3.455 
6,979 

Yen 
25,908 

14,445 

1  lispatch  of  police  to  Korea.  .  . 
Allowance    to    diplomats   and 

20,115 
5,256 

Reconstruction  of   legation  in 

34,597 

Repairing  annex  to  legation  in 
Korea 

1,550 

Reception    of    Chinese    peace 

4,916 

201,044 

fota] 

244,478 

63.353 

307,831 

Expenses  of  Legations  and  Consulates 


Names  of  legations  and 
consulates 

Fiscal  year 
1894 

Fiscal  year 
1895 

Total 

Foreign    office    and    legations 
abroad 

Yen 

218,645 

1,016 

13,140 

35 

1,297 

160 

2,075 
2,028 

3,551 

2,131 

402 

Yen 
21,918 

27,040 

641 
1,506 
5,588 
6,124 

535 

Yen 
240,563 

Legation  in  China 

1,016 

Legation  in  Korea 

40,180 

Consulate  at  Hongkong 

Consulate  at  Tientsin 

Consulate  at  Chefoo 

35 

1,297 

160 

Consulate  at  Shanghai 

Consulate  at  Fusan 

2,716 
3.534 

Consulate  at  Seoul 

9,139 
8,255 

Consulate  at  Gensan 

937 

Total 

244,480 

63,352 

307,832 

Expenses  of  Home  Office 


Special 

Session 

Imperial 

Diet 

Korean  affairs 

Extra 

rewards 

Year 

Home 
Office 

Metropoli- 
tan Police 
Office 

Prefec- 
tures 

Hokkaido 

Total 

1894 

1895 

1897 

[898 

994 

4,475 
16,954 

122,051 
50,176 

16,434 
27,300 

4,105 

139,226 
32,848 

148,059 

94.430 

139,226 

32,848 

Total  .  . 

994 

21.429 

172. 22~ 

43,734 

4.105 

172,074 

414,563 

DISBURSEMENTS   OF   THE   WAR 
Treasury  Office0 


45 


Items 

Fiscal 
year 
1894 

Fiscal 
year 
1895 

Fiscal 
year 
1896 

Fiscal 
year 
1897 

Total 

Extraordinary  war  expenditures  (auditing 

Yen 

1 1 ,969 

Yen 
11.687 

12,241 

r.  n 

38,897 

Korean  affairs: 
(A)  Cabinet 

Dispatches    to    Imperial    head- 

14.022 
93i 

4.S79 
4.099 
5. 351 

414 

2.422 
852 
350 

29.350 

4.792 
1.683 
1,690 

1,150 

12,812 

5,058 

2,258 

1,241 

1.378 

242 

6.175 

18.814 
1.683 

(B)   Treasury  Office 

Dispatches   to    Imperial    head- 

5,729 

Dispatches  to  China  and  Korea . 
(C)  Dispatch  of  Privy  Council  to  Impe- 

10,409 

(D)  Dispatch  to  the  front  of  auditors  of 

3.663 

(G)  Manufacturing  of  military  and  com- 

35,525 

Total 

62.370 

38.479 

349,779 

Extraordinary  session  of  the  Imperial  Diet: 

22,412 
25.794 

Total   

48,206 

Furnishing  of  temporary  Diet  building: 

12.729 
12.386 

12.386 

Total 

25.115 

25,1 15 

Rewards: 

(A;   Manufacturing  of  extra  decorations 

(B)   Manufacturing  of  extra  prize  cups. 

28,348 

286,399 

65.876 

157.134 

380.623 
193.207 

28.348 

286.399 

101,949 

157.134 

Managing  allowance  extra  war  funds 

76,121 

2,504 

78.625 

18,104 

319.597 

45.66s 

2.890 

3S6.256 

1.082,345 

162.301 

1.601,558 

Expenses  of   manufacturing  public  loan 

*>  12.688 

»  The  expenditure  of  the  Treasury  0  t  ion  to  the  v.  hlch  sum  In- 

cluded ull  e  erning  the  busim 

which  were  Legally  l>ui  nominally 

i  the  fiscal  year  of  1898  was  for  rewards  and  the  making  of  pi  .  amounting 

15.94  yen,  and  for  printing  public  loan  bonds  in  the  same  year:  the  following 

I  m  1000:  j.. 
b  For  the  two  ti^c.il  years  [899  and 

Judicial  Office 


Fiscal  year  1895 


46  EXPENDITURES   OF   THK    SI. \(  (-JAPANESE   WAR 

Communications  Office* 


( !ommunica1  inns  office 

Administrative  office  of  light  houses. 


I  I  )]  :  0  DOSl 

.1       " 

Nagasaki 
I  [iroshima 

oy  a 
Kumamoto 

fotal 


iikI  uh 


graph  office. 


Yen 

90,523 

4i,4i5 

2,094 

2,985 

4 

2,337 

837 

754 


140,949 


i  he  outlay  l>y  the  Communications  Office  during  1804  amounted  to  140,949  yen,  which  repre- 
sented  the  increased  expenses  caused  by  the  war,  fractions  of  yen  being  omitted. 


CHAPTER  III 

SUPPLY  OF   WAR   FUNDS 

The  expenses  of  the  Sino-Japanese  War,  as  already  out- 
lined, were  about  235,000,000  yen  in  all;  and  of  this  sum  the 
administrative  outlay  was  mostly  defrayed  from  reserve  funds 
and  surplus  in  the  Treasury;  hut  the  amount  expended  on  the 
war  being  very  large,  the  sources  thereof  are  hereafter  de- 
scribed in  detail. 

The  budget  of  revenue  and  expenditure  relating  to  the 
expenses  of  the  Sino-Japanese  War,  legally  known  as  "extra 
war  funds,"  was  250,000,000  yen;  and  the  resources  were 
mostly  public  loans  and  surplus  funds  in  the  Treasury,  as  well 
as  a  special  account  fund,  but  not  from  taxes.  This  was  the 
beginning  of  war  loans  in  Japan. 

Before  entering  upon  a  description  of  the  main  source  of 

supply  for  war  funds,  it  may  be  well  to  describe  the  budget 

and  total  accounts  relating  to  the  "special  account  for  war 

purposes." 

Revenue 


Budget 

Fixed  amount 
as  receipt 

Amount 
received 

First  section,  war  funds 

First  subsection,  war  funds.  .  .  . 

Yen 

25,000,000 
25,000,000 

Yen 

225,230,128 
225,230,128 

Yen 

225,230,128 
225,230,128 

KXI'HNDITI'RKS 


First  section,  war  funds.  .  .  . 
First  subsection,  war  funds. 


Budget 


Yen 

25,000,000 
25,000,000 


Mixed  sum  by 
Imperial 
sanction 


)V/7 
2iO.973.697 
210,973,697 


I'.i\  tnenl 
ordered 


Yen 
200,475,508 
200475,508 


Of  the  expenditures  above  mentioned,  the  amount  trans- 
ferred  to   General   Budget   Account   was  9,037,494  yen,   the 

47 


jS  EXPENDITURES  OF    rHE  S1NO-JAPANESE  WAR 

unused  portion  of  budget  was  40,486,998  yen,  and  the  unused 
portion  of  sum  allowed  by  I  mperial  sanction  was  1,460,698  yen. 
'lhc  total  fixed  sum  of  the  above  revenue  stood  as  follows 
(details  of  expenditures  to  lie  given  later): 

Yen 
Treasury  <  Iffice 219,361,977 

War  (  Iffice    5.093.917 

Naval  1  >ffice 774.234 

225,230,128 

The  detailed  items  are  as  follows: 

Yen 

First  section,  war  funds 225,230,128 

First  subsection,  war  funds:  Yen 

Raising  of  public  loan  (Treasury  Office) 1 16,804,927 

Transfer  of  the  surplus  fund  of  Treasury  (Treasury 

Office) 23,439,087 

Contributed  war  funds  (Treasury  Office) 160,800 

Contributed  relief  fund  to  War  Office 2,210,650 

Contributed  relief  fund  to  Naval  Office 578,090 

Miscellaneous  receipts:  Yen 

War  Office 1,323.162 

Naval  Office 196,143 

1,519,305 


Receipts  from  occupied  territory  (War  Office) 624,425 

Receipts  from  Formosa  and  Pescadores  Islands  .  .  .  935,680 

Transfers  to  Special  Account  (Treasury  Office) ....         78, 957, 165 


225,230,128 


As  stated  above,  the  extra  war  funds  amounted  to  such  an 
immense  sum,  that  it  was  necessary  to  make  arrangement  for 
a  special  account,  separated  from  general  revenue  and  ex- 
penditure. In  October,  1894,  by  Law  No.  24  the  "Special 
Account  for  War  Purposes  Act"  was  promulgated,  as  follows: 

Article  I.  Finances  for  the  extra  war  funds  in  regard  to  the 
affair  with  China  and  Korea  shall  be  classified  and  adjusted 
separately  from  general  revenue  and  expenditure. 

Article  II.  All  revenue  and  expenditure  for  extra  war 
funds  from  June  I,  1894,  until  the  termination  of  the  war  shall 
he  regarded  as  included  in  one  financial  year. 

The  above  articles  were  based  on  Article  XXX  of  the  law 
of  accounts,  according  to  Law  No.  4  of  1889,  which  says  that 
"in  case  it  is  difficult  to  follow  the  provisions  of  the  present 
law  on  account  of  special  requirements,  a  special  mode  of  pro- 
cedure may  be  allowed,  but  such  special  mode  of  treatment 


SUPPLY   OF   WAR   FUNDS  49 

must  be  effected  by  law."  Therefore  the  expenditure  allowed 
by  this  special  law  of  finance  was  limited  to  war  funds  re- 
quired by  the  War  Office  and  the  Naval  Office.  This  special 
account  was  wound  up  at  the  end  of  March,  1896,  in  accord- 
ance with  the  first  article  of  Law  Xo.  10  of  the  same  year 
relating  to  the  special  account  for  war  purposes.  Since  then 
all  expenditure  incurred  by  the  War  Office  and  the  Naval 
Office  for  extra  war  outlay  was  included  in  the  general  budget 
accounts. 

Vote  for  war  expenses 

Extra  expenses  for  the  carrying  on  of  Korean  affairs  were 
to  be  defrayed  from  the  second  reserve  fund  in  the  fiscal  year 
1894  (the  amount  being  950,000  yen,  that  is  to  say,  $473,100). 
This  second  reserve  depends  upon  the  69th  article  of  the 
Constitution  of  Japan  which  reads  as  follows:  "In  order  to 
supply  deficiencies,  which  are  unavoidable,  in  the  budget,  and 
to  meet  requirements  unprovided  for  in  the  same,  a  reserve 
fund  shall  be  provided  in  the  budget."  Article  7  of  "the 
law  of  Finance"  explicitly  states  that  "the  second  reserve 
shall  be  used  to  meet  necessary  expenses  unprovided  for  in 
the  budget."  At  the  same  time,  articles  16  and  17  of  the 
Rule  of  finance  regulates  its  transaction  and  process.  1  low- 
ex  er,  the  cost  proved  so  enormous  that  the  second  reserve  was 
insufficient.     Thereupon  in  June  it  was  decided  by  Imperial 

sanction  to  utilize  for  war  expenses  a  surplus  of  26, >,000 

yen  in  the  Treasury,  3,000,000  yen  of  which,  as  may  be  seen 
from  details  already  given,  was  a  loan  t<>  the  Korean  <  rovern- 
inent.  As  the  Chinese  forces  in  Korea  could  not  be  put 
down  by  tin'  troops  of  the  Fifth  Division,  after  the  battles 
fought  on  July  25  and  20.  at  Phung  Island  and  Songhwan 
respectively,  mobilization  took  place,  and  the  Imperial 
Declaration  of  War  was  issued  on  August  1.  after  which  the 
Third  Division  was  dispatched  t<>  the-  front  and  the  First 
Army  Corps  organized,  thus  extending  the  sphere  of  operations 
and  increasing  the  outlay  beyond  the  resources  of  tin  sur- 
plus in  the  Treasury. 


50  EXPENDITURES   OF   THE    SINO-JAPANESE   WAR 

On  August  15,  1894,  Urgent  Imperial  Ordinance  No.  143 
was  issued,  in  conformity  with  Article  LXX  of  the  Imperial 
Constitution,  for  the  purpose  of  raising  war  funds,  which 
provided  for  the  transfer  of  funds  included  under  special 
accounts,  borrowing  from  banks  or  the  raising  of  a  public 
loan  as  an  urgent  measure.  On  the  same  day,  by  Imperial 
Ordinance  No.  144,  war  loan  regulations  were  issued,  and  it 
w  .1-  decided  to  incur  a  debt  of  50,000,000  yen  with  interest  at 
6  per  cent  or  under  per  annum,  the  first  portion  raised  being 
the  sum  of  30,000,000  yen. 

On  September  15,  the  Imperial  headquarters  were  removed 
to  Hiroshima;  and  on  the  22d  an  extra  session  of  the  Imperial 
Diet  was  convened  at  the  same  place,  which  asked  for  a  war 
budget  of  150,000,000  yen,  a  bill  being  passed  authorizing  the 
notation  of  a  public  loan  of  100,000,000  yen  at  less  than  6 
per  cent  per  annum.  The  mode  of  flotation,  terms  of  issue 
and  period  of  redemption  and  others  were  entrusted  to  the 
Minister  of  Finance. 

Out  of  the  total  sum  of  150,000,000  yen  asked  for,  59,996,- 
885  yen  had  already  been  spent  in  urgent  necessity,  by  Impe- 
rial sanction,  beginning  with  June,  1894;  and  consequently, 
approval  of  this  action  was  asked  for  at  the  special  session  of 
the  Diet,  in  accordance  with  Article  LXIV  of  the  Imperial 
Constitution.  It  was  a  time  when  the  nation's  patriotism  and 
public  indignation  had  reached  a  state  of  high  tension  and  no 
hesitation  was  had  in  giving  approval  to  the  necessary  outlay 
for  the  war,  the  sums  spent  by  Imperial  sanction  and  the  war 
loan  being  voted  for  with  enthusiasm;  and  the  war  budget 
was  promulgated  on  October  23,  1894.  Moreover,  at  the 
eighth  session  of  the  Imperial  Diet  in  February,  1895,  the 
Lower  House  passed  the  following  resolution  with  regard  to 
war  expenses: 

With  respect  to  the  issue  of  an  Imperial  Rescript  for  the  subjugation  of  China  we 
deem  it  proper  to  say  that  we  think  the  attainment  of  the  object  of  the  war  and  the 
avengement  of  the  nation's  honor  still  a  great  way  off;  and  therefore  it  is  hereby 
resolved  that  further  disbursement  of  war  expenses  shall  be  approved  to  any  limit 
required. 


SUPPLY   OF    WAR   FUNDS  5 1 

During  1894  and  1895  the  war  was  at  its  height  and  peace 
nowhere  in  sight,  so  that  96,290,000  yen  out  of  the  150,000,000 
yen  approved  by  the  Diet  was  spent  by  Imperial  sanction  in  the 
eight  months  from  June  to  January,  1896;  and  with  an  outlay 
of  about  11,000,000  yen  a  month  for  army  and  navy,  the 
balance  of  the  sum  voted  by  the  Diet  could  scarcely  suffice  to 
June,  1895.  The  government  estimated  that  the  sum  of  at 
least  100,000,000  yen  would  be  required  from  July  to  Decem- 
ber, 1895,  and  framed  a  supplementary  budget  accordingly. 
The  measure  was  submitted  to  the  Lower  House  on  February 
20  and  authority  for  the  raising  of  further  war  loans  was  given 
by  both  houses  within  a  week,  the  supplementary  war  budget 
being  issued  on  March  2,  1895. 

Disbursements 

The  main  resource  for  war  funds  was  public  loans  and 
special  contributions  to  war  funds,  special  contributions  for 
relief  of  army  and  navy  men,  transfers  from  surplus  in  the 
Treasury  and  from  special  account  funds.  The  surplus  from 
receipts  and  disbursements  of  the  Treasury  was  deposited  in 
the  Bank  of  Japan  either  as  a  fixed  or  current  account  at 
reasonable  interest,  in  accordance  with  Law  No.  16,  in  June, 
1894,  at  the  beginning  of  the  war;  and  disbursements  from 
this  account  naturally  caused  an  increase  in  the  bank  note 
issue,  which  was  further  accentuated  by  a  government  loan 
from  the  Bank  of  Japan  and  the  transfer  1  >f  the  special  account 
fund  to  the  war  fund.  Thus  the  expenses  of  the  war  were 
covered  by  floating  of  loans  and  by  increasing  the  issue  of 
bank  notes. 

Monthly  receipts  for  the  Special  Account  for  War  Purposes 
were  as  follows:  ' 

1  Table  docs  not  in  some  parts  correspond  to  the  monthly  receipt  of  war  funds 
which  will  be  described  later,  because  it  represents  the  sum  received  by  the  revenue 
officers,  while  the  other  was  the  sum  paid  into  the  cash  office. 

Before  the  setting  aside  of  a  special  account  for  war  purposes,  ihe  allotted  amount 
for  war  funds  from  the  general  account  was  paid  out  in  the  first  month  from  the 
surplus  in  the  Treasury — 26,000,000  yen — and  the  public  loan  and  contributed 
relief  funds  are  described  in  the  following  table  according  to  the  months  they  were 
actually  received  by  the  revenue  officer. 


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SUPPLY   OF    WAR   FL'XDS 


53 


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54  EXPENDITURES   OF   THE   SINO- JAPANESE   WAR 

The   methods  of  raising  war  funds  may  be  classified  as 

follows: 


Private  Subscriptions  to  Public  Loans  and  War  Funds 


Date 


1894 

July 

August.  .  . 
September . 
October.  .  . 
November . 
December. 

1895 
January.  . 
February. 
March.  .  .  . 

April 

May 


June 

July 

August.  .  . 
September. 
October.  .  . 
November. 
December . 

1896 
January . . . 
February .  . 
March 

April 

May 

June 

July 

August.  .  . 
September. 
October.  .  . 
November. 
December . 


Public 
loan 


Total 233,618,653 


Yen 


2,500,000 

500,000 

5,241,000 

7,241,300 


2,795,ooo 

6,480,100 

9,645,900 

10,032,400 

13,297,200 

10,721,700 

9,120,000 

88,490 

26,310 

322,860 

1,051,170 

2,749-989 


25,861,135 

843.865 

1,652,000 

1 ,438,000 

1,015,000 

2,163,000 

679,500 

942,000 

405,808 

116,804,926 


Contributed 
to  war 
funds 


Yen 


100,000 
60,800 


Contributed 

to  relief  fund 

of  army  and 

navy 


160,800 


321,600 


Yen 

5.836 
175.238 
347.444 
420,371 
254,546 
276,854 

280,688 

321,011 

324,163 

166,792 

106,095 

26,046 

22,136 

14,262 

24,676 

9,604 

4,782 

3,478 

964 

1,066 

1,011 

205 

307 

29 

53 

964 

121 


2,788,741 


5.577.483 


Total 


Yen 

5,836 

175.238 

2,847,444 

920,371 

5,595.546 

7,578,954 

3.075.688 

6,801,111 

9,970,063 

10,199,192 

13,403,295 

10,747,746 

9,142,136 

102,752 

50,986 

332,464 

1,055.952 

2,753.467 

964 

1,066 

25,862,146 

844,070 

1,652,307 

1,438,029 

1,015,053 

2,163,964 

679,621 

942,000 

405,808 

119,754,467 


239.5i7.736 


SUPPLY   OF   WAR    FUNDS 


55 


War  Expenses  Met  by  Increasing  the  Issue  of  Bank  Notes  of  Bank 

of  Japan  ■ 


Date 


1894 

June 

July 

September 
October.  . 
November 
December . 

1895 
January .  . 
February . 
March .  .  . 

April 

May 

June 

July 

August.  .  . 
September 
October.  . 
November 
December . 

1896 
January. . 
February . 
March .  .  . 

April 

May 

June 

July 

August.  .  . 
September 
October.  . 
November 

Total . 


Surplus  of 
Treasury 


Yen 

26,000,000 


1 19,086 


23.439.086 


Miscellaneous 
receipts 


Yen 


1,806 
10.566 


83,202 

5.045 

11,361 

1 1. 216 

19,670 

32.743 

146,969 

50,293 

99,5i4 

15.502 

183.959 

272,832 


126,330 
63,242 
53.077 
51,703 
54.070 
81. 711 

102,406 

1,163 

20,237 

19,008 

1,679 


Borrowed 

from  Bank 

of  Japan 


1  en 


6,000,000 

12,500,000 
19.530,000 


18,420,000 
22,530,000 
20,500,000 
17,500,000 
14,000,000 
12,500,000 
12,500,000 
12.500,000 
18,390,000 
25,000,000 
33,100,000 
41,500,000 


42,500,000 
41,270,000 
37.900,000 
41,240,000 


440.380,000 


Transfers 

from 
Treasury 


Yen 


2.553.377 
8,814,025 
7.970,645 


16.724,798 
16,048,649 
22,368,991 
25,077.224 
24,195.419 
22,661,037 
20.727,592 
26,748,677 
29,080,730 
32.412.10.1 
31.534.407 
28,710,373 


34.930,525 
4I,773.o6l 
26,7  '  0,  !'■-• 
[6,107,780 
3,102,036 


438,252,092 


Transfers 
from  spe- 
cial ac- 
count fund 


Yen 


9.020,000 
52.020.000 
.     - 

7.665.676 
4.613.948 
1,356.585 


78,957.165 


War    scrip 
issued 


3.780.000 
3.780.000 
3.780.000 
3.780,000 

1. 886.816 
1.293.606 

820.168 


104 

104 
'"4 
104 


26.444.578 


a  The  sum  borrowed  from  the  Bank  of  Japan,  the  transfers  from  the  Treasury  and  the  issuing  of 
war  scrip  were  temporary  measures  tomeet  deficits,  and  aitei  Ai>ril  1.  t8o6,  these  were  redeemed 
by  public  loan  and  by  transfer  of  special  account  fund,  which  accounts  for  some  items  being  du- 
plicated. 


The  revenue  from  occupied  territory  amounted  to  024,425 
yen,  or  about  $310,964,  which,  on  account  of  having  been 
levied  after  March,  1896,  is  not  scheduled  above. 

The  monthly  receipt  of  war  funds  stood  as  shown  in  the 
table  at  the  top  of  next  page,  but  in  case  the  amount  of 
revenue  should  not  correspond  to  the  above  tables  reference 
had  better  be  made  to  the  former. 

As  previously  described,  the  amount  of  revenue  for  war 
funds  does  not  always  correspond  to  payment  for  war  ex- 
penses; and  such  being  the  case,  whenever  a  deficit  would  ha>  e 
occurred,  money  was  borrowed   from  the   Bank  of  Japan,  or 


5<)  I  XPENDITURES   OF   THE   SINO-JAPANESE   WAR 

Mom  in. \    Revenue  and  Expenditures,  1894-1896 


Date 


[894 
June  6  J 11 1 >  30. 

August 

September 

October 

November 

December 

1895 

January 

February  

Match 

April 

May 

June 

July 

August 

September 

October 

November 

December 

1896 

January 

February 

March 

April-November 

Total 


Reven  uc 


Yen 
26,000,000 


3.395-5^5 
6,579,153 
7,588,052 

3,161,151 
6,805,365 

6,992,033 
10,201,408 
13,422,961 
10,780,339 

9,289,459 

152,984 
151. 841 

346,675 
1,239,680 
3,026,534 


127,291 
64.316 

26,548  278 
89.357,043 


225,230,128 


Expenditures 


War  Office     Naval  Office  Total 


Yen 

4.789,377 

5,945. 4<>7 

7,970,252 

11,988,463 

12,931,275 

10,999,451 

9,262,790 
8,550,979 
13,696,459 
7,974,876 
7,953.360 
6,215,641 
5.651.285 
4.357.157 
6,683,723 
8,406,199 
6,940,476 
6,980,463 

6,096,322 

4,742,457 

7,35i,52i 

976,652' 


164,520371 


Yen 

474,606 
1,705,441 
i.795.OI3 
3.27L294 
6,408,527 
2,775,220 


1.542,514 
1,688,237 
1,365,916 
1,934,765 
1,087,796 
1,530,316 
1,228,999 
1,265,465 
824,167 
1,288,730 
1,089,670 
1,580,345 


835.667 
529.785 
764.158 
968,509 


35955,140 


Yen 

5,272,982 

7.650,937 
9.765,265 

15,259,757 
i9,339,8oi 

13,774,671 

10,805,304 

10,239,216 

15,062,375 

9,909,641 

9,041,156 

7,745.957 
6,880,283 
5,622,622 
7,507,890 

9.694.929 
8,030,146 
8,560,809 

6,931.989 

5,272,242 

8,115,679 
8,i43a 


200,475,508 


•After  April,  1896.  revenue  is  not  tabulated  by  the  month,  since  it  was  an  adjustment  account 
after  the  end  of  the  fiscal  year;  but  these  amounts  show  that  the  fixed  sum  of  refunding  exceeds  that 
of  payment. 

appropriated  from  surplus  in  the  Treasury,  or  by  the  issue  of 
war  scrip;  and  these  temporary  measures  were  repaid  after 
April  1,  1896,  by  raising  public  loans  and  the  transfer  of  the 
special  account  fund,  which  transactions  will  be  described 
hereafter. 

In  regard  to  the  above,  the  government  used  bank  notes 
and  copper  coins  as  far  as  possible  to  meet  extra  expenses,  and 
thus  prevented  a  diminution  of  specie  as  well  as  the  danger  of 
a  financial  panic.  The  total  amount  paid  out  for  war  from 
June,  1894,  to  the  end  of  March,  1896,  was  200,483,651  yen, 
the  following  currency  being  employed: 


SUPPLY   OF    WAR    FUNDS 
Currency  Expended  for  War  Purposes,   i 894-1 896 


57 


Amount  Percentage 


Bank  notes  and  copper  coin 

Silver  dollars 

Subsidiary  silver  coins 

Silver  bullion 

Mexican  dollars 

Sycees 

War  scrip 

Total 


183,981,744 

11,651,482 

2,60I,028 

300,000 
850,000 

1.099.293 
IO4 


200,483,651 


91.8 

5  - 
■  i 
0  2 
0.4 
0  5 


With  regard  to  war  scrip,  it  may  be  necessary  to  say  some- 
thing as  to  how  it  was  used.  Had  bank  notes  been  used  in  the 
theater  of  war,  the  paper  currency  would  accordingly  have  had 
to  be  increased  and  in  consequence  there  might  have  been  a 
considerable  withdrawal  of  specie.  To  avoid  this,  war  notes 
of  1.5  and  10  taels,  as  well  as  of  5  sen,  2  sen,  and  one-half  sen, 
were  issued.  It  was  found,  however,  that  to  circulate  both 
war  notes  and  bank  notes  in  the  same  region  was  inconvenient 
for  transactions;  and  so  when  the  Japanese  forces  were  about 
to  invade  the  province  of  Chihli  they  were  provided  with  war 
notes  to  the  face  value  of  3,780,000  yen,  equal  to  2,700,000 
taels,  for  use  in  that  region.  Peace  was  so  soon  restored,  how- 
ever, that  it  was  found  that  only  103.60  yen  of  the  war  scrip 
had  been  used.  The  supply  of  war  funds  has  already  been 
outlined  in  a  very  general  way,  but  each  item  in  detail  will  be 
given  later  on. 

Expenditure  of  the  Surplus  in  the  Tri  \m  ry  and  i  hi 
Temporary  Making  Up  of  Deficits 

The  budget  for  army  and  navy  outlay  during  the  war  with 
China  was  calculated  at  the  sum  of  250,000,000  yen,  for  the 
greater  part  of  which  the  government  had  to  depend  on  public 
loans,  the  surplus  in  the  Treasury  for  the  fiscal  year  of  [893, 
the  transfer  of  indemnity  and  other  sources  of  income  being 
comparatively  of  minor  importance,  as  shown  in  the  following 
table : 


58  I  XPENDITURES   OF   THE   SINO-JAPANESE   WAR 

Yen               Percentage 
I  reasurj  surplus,  fiscal  year  1893 23,439,086 10.4 

Public  loans        116,804,926 51 .9 

I  ransferol  indemnity 78,957.165 35.0 

Other  receipts 6,028,950 2.7 

Total 225,230,127  100. o 

Although  the  surplus  in  the  Treasury  could  be  used  im- 
mediately at  the  outset  of  the  war,  the  public  loan  turned  in 
4,326,108  yen  in  monthly  average  from  September,  1894,  to 
November,  1896;  and  the  transfer  of  indemnity  was  carried 
out  after  April,  1896.  So  that  during  this  time  revenue  and 
expenditure  did  not  often  correspond,  which  will  be  explained 
later. 

Before  the  Sino-Japanese  War,  the  annual  accounts  showed 
a  yearly  surplus,  owing  to  the  negative  policy,  and  the  actual 
results  for  the  years  before  the  war  stood  as  follows: 

Fiscal  year  Yen 

1889 16,974,307 

1890 24,343,951 

1891 19.675,597 

1892 24,727,171 

1893 29,187,509 

Total 1 14.908,535 

The  surplus  of  the  fiscal  year  1893  was  29,187,508  yen; 
and  5,748,422  yen  of  this  sum  was  transferred  to  the  next  fiscal 
year,  so  that  23,439,086  yen  was  transferred  to  the  war  fund, 
which  facilitated  our  war  movement.  Although  at  the  out- 
break of  war  two  or  three  special  accounts  were  added  to  the 
surplus  of  23,439,086  yen  described  above,  so  that  it  amounted 
to  some  26,000,000  yen  as  war  fund  (including  439,086  yen 
added  in  November),  3,000,000  yen  out  of  the  amount  were 
loaned  to  the  Korean  Government.  Therefore  it  was  in  the 
end  the  same  as  mentioned  at  first.  And  although  the  war 
expenses  were  defrayed  by  the  transfer  of  the  surplus  in  the 
Treasury,  from  the  outbreak  of  war  to  September,  in  a  short 
time  there  \\  as  a  deficit. 


SUPPLY   OF    WAR   FUNDS 
Monthly  Receipts  and  Disbursements,  i  894-1 896 


59 


1894 

June  6-July  31  .  . 

August 

September 

October 

November 

December 

1895 

January 

February 

March 

April 

May 

June 

July 

August 

September 

October 

November 

December 

1896 

January 

February 

March 

April-November  a 

Total 


Receipts 


Yen 

26,000,000 


3.395.565 
6,579.153 
7,588,052 


,161,151 
805,365 

.992,033 
,201,408 
422,961 
780,339 
,289,459 

152.984 
151.841 

346.675 

239,680 
026,534 


127,291 
64,316 

26,548,278 
89.357,043 


225,230,128 


Disbursements 


Yen 

5,272,982 

7,650,937 
9.765.265 

15.259.757 
i9.339.8oi 
13,774,671 


10,805.304 
10,239,216 
15,062,375 
9,909,641 
9.041,156 
7,745.957 
6,880,283 
5,622,622 
7,507,890 

9.694.929 
8,030,146 
8,560,809 


6.931.989 
5,272,242 
8,115,680 
8,i43b 


200,475,508 


»  After  April,  1896,  accounts  were  not  reckoned  by  the  month,  as  it  was  an  adjustment  account 
after  the  end  of  the  fiscal  year. 

b  Fixed  sum  of  refunding  exceeded  that  of  payment. 


From  June,  1894,  to  May,  1896,  the  highest  total  shortage 
was  83,043,165  yen,  which  occurred  in  February,  1896,  to 
meet  which  transfers  were  at  once  made  from  the  Treasury, 
or  loans  were  had  from  the  Bank  of  Japan,  or  else  war  scrip 
was  issued  to  make  temporary  adjustment.  The  following 
table  will  indicate  the  details  of  the  making  up  of  temporary 
deficits.  Although  the  sum  borrowed  from  the  Bank  of 
Japan  will  be  described  later,  it  is  added  here  for  the  sake  of 
convenience: 


60  I   XPENDITURES   OF   THE    SINO-JAPANESE    WAR 

Means  ob  Meeting  Deficits  in  War  Fund,  1894-1896 


Date 


1894 

June 

July 

August .  .  . 
September 
October. . 
November 
December 

1895 
January.  . 
February . 
March .  .  . 

April 

May 

June 

July 

August .  .  . 
September 
October. . 
November 
December 

1896 
January.  . 
February . 
March.  .  . 

April 

May 

Total 


Total 
deficits  in 
war  fund 


Yen 


8,553.377 
21,314,025 
27,500,645 


35.I44-798 
38,578,649 
46,648,991 
46,357,224 

41.975.419 
38,941,037 
36,531,861 
42,001,498 

49,357,547 
58,705,800 
65,496,266 
71,030,541 


77.835.239 
83,043,165 
64,610,566 
57,347,884 
3.102,138 


Transfers 

from 
Treasury 


Temporary  loan 

from  Bank  of 

Japan 


914,076,670 


Yen 


2,553.377 
8,814,025 
7,970,645 


16,724,798 
16,048,649 
22,368,991 
25,077,224 
24,195,419 
22,661,037 
20,727,592 
26,748,677 
29,080,730 
32,412,194 

31.534.497 
28,710,373 


34,930,525 
41,773,061 
26,710,462 
16,107,780 
3,102,036 


438,252,092 


Yen 


6,000,000 
12,500,000 
19,530.000 

18,420,000 
22,530,000 
20,500,000 
17,500,000 
14,000,000 
12,500,000 
12,500,000 
12,500,000 
18,390,000 
25,000,000 
33,100,000 
41,500,000 


42,500,000 
41,270,000 
37,900,000 
41,240,000 


449,380,000 


Amount  of 

war  scrip 

issued 


Yen 


3,780,000 
3,780,000 
3,780,000 
3,780,000 
3,304,269 
2,752,821 
1,886,817 
1,293,606 
861,769 
820,168 


404.7H 
104 
104 
104 
102 


26,444,578 


After  June,  1896,  there  was  no  further  shortage. 


SUPPLY   OF    WAR    FUNDS 


6l 


Ratio  of  Means  of  Meeting  Deficit^  in  War  Fund,   [894-1896 


Date 


1894 
October.  . 
November 
December 

1895 
January. . 
February . 
March.  .  . 
April .... 

May 

June 

July 

August.  .  . 
September 
October. . 
November 
December 

1896 
January. . 
February . 
March  .  .  . 
April .... 
May 


Transfers 

from 
Treasury 


29.9 

4'4 
29.0 


44  9 
503 
41  3 
28.1 

100  o 


Loans  from 
Bank  of 
Japan 


70.1 
58.6 
71  .0 


52 

5* 
43 
37 
33 
32 
34 
29 

37 
1- 
50 
58 


Issue  of  war 
scrip 


8.1 
8.1 
9.0 
9  7 
9i 
6-5 
3-8 
2  .2 

13 
1  .2 


0-5 


As  may  be  seen  from  the  above,  the  temporary  deficit  was 

met  by  transfers  from  the  Treasury  and  loan-  from  the  Bank 
of  Japan.     So  much  then  for  the  summary  of  war  finance. 

Issue  of  Public  Loan- 

The  public  loan  floated  to  cover  the  expenses  of  the  war 
with  China  and  affairs  in  Korea  was  named  the  "War  Loan," 
and  the  sum  of  legal  issue  anticipated  was  in  all  about  230,- 
000,000 yen;  but  only  124,920,0003^  was  put  on  the  market, 
as  may  be  seen  from  the  statements  on  pages  62  63. 

A  necessary  disposition  of  finance  with  regard  to  Korean 
affairs  was  promulgated  by  Imperial  Emergency  Ordinance 
No.  143  on  August  14,  1894,  as  follows:  "The  government  is 
authorized  to  float  a  public  loan  for  the  purpose  of  meeting 
the  expenses  of  Korean  affairs."  War  loan  regulations  were 
then  promulgated  by  Imperial  Ordinance  No.  144  on  August 


02 


EXPENDITURES   OF    THE   SINO-JAPANESE   WAR 


"O    41 
O    3 

A 

1- 

3 
tn 

L. 

js  c 

3    C 

a*a 

0 

0- 

Bought  by  Bank 
of    Japan    ac- 
cording to  spe- 
cial regulations 

-o  C 
c  o 

rt  •  - 

is  3 
cj   bfl 

Imp.  Ord.  No.  144, 
Aug.  15,  1894 

Laws  Nos.  25  and 
195, Treas.  Dept., 
Oct.  23,  1894 

Law  No.  8,  Mar.  2, 
1895;  Ord.    No. 
2,  Treas.  Dept., 
Mar.  4,  1896 

Ord.  No.  3,  Treas. 
Dept.,    Mar.    4, 
1896 

Imp.  Ord.  No.  137, 
Oct.     2,      1896; 
Ord.      No.       3, 
Treas.    Dept., 
Oct.  4,  1896 

CD 

e 

•  -i   en 

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rt  E 

it 

1° 

8;  Sept.  20,  1894- 
June  30,  1895 

7;  Dec.  25,  1894- 
June  30,  1895 

8;  Mar.  31-Oct. 
31,  1896 

Amount 

authorized 

Yen 
30,000,000 

50,000,000 
10,000,000 

25,000,000 
10,000,000 

"o  c 
.tJ.2 
E  td 
—  .u 

c  c 

Sept.  10-13,  l894 
Dec.  11-15,  1894 

Mar.  16-21,  1896 

c 

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3d  Subscription  (4th  issue) .... 

4th  Issue 

V 

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SUPPLY   OF    WAR   FUNDS 


63 


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64  EXPENDITURES   OF   THE   SINO-JAPANESE   WAR 

15,  1894,  when  it  was  decided  to  float  a  public  loan  by  in- 
stalments to  the  limit  of  50,000,000  yen.  This  was  the 
beginning  of  war  loans  in  Japan. 

The  war  loan  regulations  fixed  only  the  amount  of  the 
subscription,  the  period  of  redemption,  the  rate  of  interest  and 
the  lime  of  payment.  All  other  details  of  the  loan  were  to  be 
based  on  the  consolidated  public  loan  regulations  by  Imperial 
Ordinance  No.  66  of  October  16,  1886;  and  the  war  loan 
regulations  were  as  follows: 

War  loan  regulations 

Article  i.  War  loans  shall  be  floated  gradually  to  the  limit  of 
50,000,000  yen  by  Imperial  Ordinance  No.  143. 

Art.  2.  The  interest  on  the  loan  shall  be  less  than  6  per  cent  per 
annum,  and  shall  be  paid  twice  yearly,  in  the  month  of  June  and 
December,  until  the  redemption  of  the  principal. 

Art.  3.  The  principal  shall  be  redeemed  within  fifty  years  from 
the  sixth  year  after  issue. 

Art.  4.  The  subscriptions  to  the  loans,  the  amount  of  issue,  the 
price,  rate  of  interest,  the  period  of  subscription,  the  number  of 
limes  of  instalment  for  subscription  and  other  details  shall  be  fixed 
by  the  Minister  of  Finance. 

Art.  5.  The  delivery  of  public  loan  bonds,  prescriptions  in  regard 
to  payment  of  principal  and  interest,  the  management  of  bonds,  and 
all  other  details  not  fixed  by  this  regulation  shall  be  arranged  ac- 
cording  to  the  Consolidated  Public  Loan  Regulations  promulgated 
by  Imperial  Ordinance  Xo.  66  of  the  year  IT" 


The  subscriptions  received  on  the  above  basis  comprised 
the  first  war  loan;  and  the  method  of  subscription  was  an- 
nounced 1»\  Notification  No.  32  issued  by  the  Treasury  De- 
partment on  August  17,  1894,  the  amount  called  for  being, 
as  already  explained,  30,000,000  yen.  They  were  issued  at 
par  and  the  security  money  was  to  be  10  per  cent  of  the  face 
value,  the  security  to  be  transferred  to  the  first  payment,  and 
the  rest  to  be  paid  tip  in  seven  instalments  from  November  16, 
1894,  to  the  end  of  June,  1895. 


SUPPLY    OF    WAR    FUNDS  65 

Method  of  Payment  fob  Bonds  of  First  War  Loan 


Payments 

[894    [895 

Yen 

First 

to  September  20 
<  l(  tober  16-31 

\u\  I'llll  n   I"    H1-3O 

February  n>  28 
March  16-31 
April   16-30 
\l.i\    [6-3I 
June  16-30 

Second 

Third 

Fourth 

10 

Fifth 

Sixth 

10 

Seventh 

20 

Eighth 

10 

"Transferred  from  security. 

The  first  war  loan  happened  to  be  placed  on  the  market  at 
a  time  when  money  in  both  Osaka  and  Tokyo  was  showing 
the  customary  stringency  of  the  season,  and  the  daily  in- 
terest fixed  by  the  Tokyo  Bankers'  Club  was  2  sen,  8.4  rin, 
or  10.022  per  cent,  and  loans  from  the  Bank  of  Japan  were 
then  2  sen,  20.  rin,  or  8.03  per  cent.  The  daily  discount  rate 
of  securities  payable  in  Tokyo  was  2  sen,  1  rin,  which  is 
equal  to  7.665  per  cent,  while  the  daily  rate  of  discount  of 
securities  payable  in  another  place  was  2  sen,  3  rin,  or  8.395 
per  cent.  The  minimum  and  maximum  of  interest  in  Tokyo 
and  Osaka  at  that  time  was  as  follows: 


Interest  Charges 

in  Tokyo  \m> 

Osaka 

1  !lassification  of 

amount  loaned 

on  security 

Modi  hs 

Tok\o 

Osaka 

1  [ighest 

1  owes! 

Average 

1  Iigh<  -1 

1    OWI   -! 

\\  erage 

Yen 

Per 

Per 

Per 

Per 

Per 

Per 

cent 

criil 

cent 

ccni 

cent 

ecu! 

IO0    1000  

Vug. 

1    [27 

0  959 

1    034 

1   351 

1    i;,j 

I   ^41 

Sept. 

1    [07 

0  971 

1    056 

1    J  So 

1    010 

I     [22 

1,000-10,000 .  .  . 

Aug. 

1  076 

0  923 

1    003 

I    278 

1  050 

1     [32 

Sept. 

1  051 

0  934 

1    003 

1     [63 

0  96] 

I    059 

Al"i\  c  m.ooo  .  .  . 

Aug. 

0  987 

,,  882 

0  926 

1    J.J1 

I  059 

I     132 

Sept. 

0  98] 

0  875 

0  934 

1     165 

1   009 

1    090 

The  market  price  of  5  per  cent  national  bonds  depreciated 

as  follows: 


66 


EXPENDITURES   OF   THE   SINO-JAPANESE   WAR 
Depreciation  of  5  per  cent  National  Bond-. 


Date 

I-oans 

Kinroku 

Naval 

Consolidated 

August,  1894 

September,  1894 

Yen 

100.38 

99-57 

Yen 
95  90 
99  56 

Yen 
100.49 
100.21 

To  undertake  the  flotation  of  a  pubic  loan  for  so  large  a 
sum  as  30,000,000  yen  was  without  precedent  in  Japan.  Con- 
sequently the  government,  and  the  public  as  well,  regarded 
the  outcome  with  some  misgiving.  But  fortunately  the 
loyalty  and  patriotism  of  the  nation  overcame  all  difficulties 
and  the  subscriptions  amounted  to  no  less  than  77,002,650 
yen,  the  highest  bid  per  hundred  of  face  value  being  142.44 
yen,  while  other  bids  were  125  and  120  yen.  The  authorities 
therefore  decided  to  accept  applications  for  subscriptions 
above  par  to  the  extent  of  11,627,850  yen,  and  at  par  to  the 
amount  of  18,372,150,  or  30,000,000  yen  in  all. 

The  sum  of  actual  receipts  amounted  to  30,063,372  yen,  but 
as  there  were  a  few  applicants  who  did  not  take  up  the  amount 
applied  for  and  forfeited  their  deposit  money  the  total  was 
thus  affected,  yet  the  amount  subscribed  was  thereby  reduced 
by  only  2,200  yen,  while  the  reduction  in  the  actual  receipts 
was  no  more  than  1,855  yen-  This  signal  success  was  ob- 
tained through  the  people's  patriotism  and  public  indignation. 

The  second  loan,  which  was  issued  in  accordance  with  Law 
No.  25  of  October  23,  1894,  was  Put  on  the  market  in  Novem- 
ber, 1894.  The  law  reads  as  follows:  "In  order  to  defray  the 
war  expenses  in  connection  with  China  and  Korea  the  govern- 
ment is  hereby  authorized  to  raise  a  public  loan  gradually  at 
less  than  6  per  cent  interest;  and  the  necessary  details,  such  as 
methods,  agreements,  subscriptions  and  period  of  redemption, 
shall  be  fixed  by  the  Minister  of  Finance." 

On  November  22,  1894,  by  Departmental  Order  No.  19, 
the  Treasury  floated  a  loan  of  50,000,000  yen  at  5  per  cent 
interest,  the  notice  concerning  subscriptions  being  based  on 


SUPPLY   OF    WAR    FUNDS 


6? 


Departmental  Order  No.  40,  issued  on  the  22d  of  the  same 
month  by  the  Treasury.  The  loan  was  issued  at  95  per  100 
yen  of  face  value,  the  security  money  to  be  transferred  to 
subscription  as  first  payment,  and  the  balance  to  be  paid  up  in 
six  instalments  from  January  16,  1895,  to  the  end  of  June  of 
the  same  year.  The  period  of  application  for  subscription 
was  limited  to  four  days  only,  from  December  11  to  15, 
other  details  being  the  same  as  in  the  case  of  the  first  loan. 
The  instalments  were  to  be  paid  up  at  the  following  rate  per 
hundred  yen  of  face  value: 

Method  of  Payment  for  Bonds  of  Second  War  Loan 


Payments 

1 894- 1 895 

Yen 

First 

to  December  25 
January  16-31 
February  16-28 
March  16-31 
April  16-30 
May  16-31 
June  16-30 

10* 

10 

Third    .                                     

10 

Fourth 

10 

Fifth 

20 

Sixth  

*5 
20 

»  Transferred  from  security. 

Applications  for  subscriptions  amounted  to  90,301,300  yen, 
being  40,301,300  yen  in  excess  of  the  issue  called  for.  The 
highest  bid  was  120  yen.  The  government  then  decided  to 
accept,  first,  applications  for  subscriptions  above  par  to  the 
amount  of  22,119,850  yen,  and,  next,  from  among  applicants 
at  less  than  par,  but  more  than  95  per  100  yen,  the  sum  of 
7,924,000  yen;  and  19,955,150  yen  from  among  applicants  at 
par,  making  50,000,000  in  all. 

As  it  was  about  the  end  of  the  year,  the  money  market  was 
somewhat  tight,  and  the  market  price  of  the  national  bonds 
tended  toward  depreciation.  Nevertheless  the  outcome  was 
successful  beyond  expectation.  This  was  due  largely  to  the 
strength  of  the  government's  financial  credit  and  the  inherent 
economic  power  as  well  as  to  the  patriotic  feelings  of  the  people. 

The  third  loan  was  issued  according  to  Law  No.  8  of  March 
2,  1895,  which  says:  "In  order  to  meel  expenses  in  regard  to 
the  war  with  China  the  government  is  hereby  authorized  to 
float  by  degrees  a  public  loan  to  the  limit  of  100,000,000  yen 


us 


I M'l  MMTURKS   OF   THE    SINO-JAPANESE   WAR 


at  interest  of  less  than  6  per  cent;  and  the  necessary  details  as 
to  price,  method  of  flotation,  agreement  and  period  of  subscrip- 
tion and  redemption  shall  be  left  to  the  Minister  of  Firtance." 

On  March  4,  1896,  in  accordance  with  Order  No.  2  of 
the  Treasury  Department  it  was  decided  to  call  for  a  loan  of 
10,000,000  yen  at  5  per  cent  interest;  and  in  accordance  with 
Announcement  No.  13  issued  by  the  Treasury,  the  date  of 
payment  for  subscriptions  was  to  be  from  April  16  to  the  end 
of  October,  1896,  in  seven  instalments,  the  period  for  applica- 
tions to  be  from  March  16  to  21,  all  other  details  to  be  the 
same  as  in  the  first  issue. 

The  rate  of  payment  for  instalments  was  as  follows: 

Method  of  Payment  for  Bonds  of  Third  War  Loan 


Payments 

1896 

Yen 

First      

to  March  31, 
April  16-30 
May  16-31 
June  16-30 
July  16-31 
August  17-31 
September  16-30 
October  16-31 

I0a 

10 

Third 

20 

10 

Fifth    

10 

sixth                                        

20 

10 

Eighth                               

10 

a  Transferred  from  security. 

As  the  war  was  now  over  and  the  nation  busily  engaged  in 
post-bellum  enterprises,  many  hopeful  undertakings  were  being 
started  and  the  money  market  was  showing  considerable 
stringency.  Consequently  the  amount  subscribed  was  only 
1 1578,050  yen,  the  highest  bid  being  103,  the  applications 
above  par  reaching  1,026,850  yen  and  those  at  par  551,200. 
Therefore  to  make  up  the  deficiency,  5,000,000  yen  was  trans- 
ferred from  the  indemnity  account,  and  the  Bank  of  Japan 
advanced  the  sum  of  3,420,000  yen  on  these  bonds. 

The  general  features  of  each  of  the  loans  having  been  out- 
lined above,  the  loans  may  be  tabulated  as  on  pages  69-70. 

During  the  periods  of  subscription  for  the  first  and  second 
loans  the  war  was  in  progress,  and  news  of  victory  was  con- 
stant ly  in  the  air.  but  no  one  of  course  knew  as  yet  just  what 
would  lie  the  final  outcome.  Yet  it  was  quite  evident  that 
the  nation  was  being  worked  up  to  a  high  state  of  excitement 


SUPPLY   OF   WAR   FUNDS 


69 


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EXPENDITURE    OI-    Till-:    SI  \<  (-JAPANESE    WAR 


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SUPPLY    OF    WAR   FUNDS  71 

and  indignation,  and  liberal  contributions  for  the  relief  of 
soldiers  as  well  as  many  other  patriotic  works  were  under- 
taken, with  the  result  that  the  loan  was  popular  beyond  all 
expectation,  especially  as  compared  with  loans  raised  in  time 
of  peace.  Even  the  very  poor  who  could  not  be  expected  to 
have  more  than  would  keep  them,  applied  for  subscriptions 
out  of  their  small  savings  and  by  dint  of  the  most  careful 
frugality.  Accordingly,  the  number  of  subscribers  to  the 
first  loan  was  119,015;  to  the  second  loan,  173,051;  and  the 
average  sum  subscribed  for  in  the  first  loan  was  647  yen; 
and  in  the  second  loan,  521  yen.  The  difference  was,  there- 
fore, as  far  apart  as  heaven  and  earth  as  compared  with  loans 
issued  in  time  of  peace,  the  average  then  being  3,005  yen  per 
subscriber. 

On  account  of  the  number  of  applications  from  small  sub- 
scribers being  so  numerous  there  were  naturally  some  deferred 
payments,  the  interest  on  which  amounted  to  7,3 1 3.7 1  yen  for 
the  three  issues.  Moreover,  the  regulations  concerning  con- 
solidated bonds  required  that  applications  which  were  not 
paid  up  should  become  invalid  and  the  security  money  for- 
feited together  with  the  amounts  paid  up.  For  this  reason 
the  fixed  amount  subscribed  was  slightly  reduced.  This  being 
the  case,  the  actual  sum  of  the  war  bonds  issued  was  89,996,- 
500  yen  in  all.  The  actual  sum  of  receipts  was  still  further 
modified  by  interest  on  deferred  payments,  the  account  being 
as  shown  in  the  table  on  page  72. 1 

The  public  loans  heretofore  described  were  issued  directly 
to  the  public  by  so-called  general  subscription.  At  the  same 
time  a  war  loan  of  35,000,000  yen  was  subscribed  tor  by 
extraordinary  special  issue  based  upon  Article  VI,  paragraph 

1  By  regulations  of  consolidated  bonds  the  paid  up  sums  of  those  failing  to  com- 
plete their  payments  were  forfeited;  and,  in  this  way,  of  the  first  issue  20  yen  of 
security  money  and  90  yen  of  the  first  instalment  was  forfeited,  190  yen  of  the 
second  instalment  and  45  yen  of  the  third  instalment.  In  the  second  issue  65  yen 
among  subscribers  to  the  first  instalment,  50  yen  of  the  second,  6oyen  of  the  third, 
60  yen  of  the  fourth,  and  30  yen  of  the  fifth  instalment,  were  forfeited. 

The  difference  between  par  and  above  par  price  which  was  paid  up  in  the  first 
issue  was  12.80  yen  and  4.04  yen  in  the  second.  However,  in  the  first.  .1-  there  was 
a  case  in  which  only  the  security  money  was  paid  and  not  0.30  yen  ol  the  difference 
mentioned  previously,  a  fractional  Bum  of  0.30  yen  did  not  go  into  the  actual  receipt. 


;j  EXPENDITURES   OF   THE   SINO-JAPANESE   WAR 

Receipts  from  War  Loa\> 


First   issue 

Second  issue 

Third  issue- 

Total 

Subscription: 

Amount  issued 

"        deferred 

Yen 
30,000,000 
2,200 

Yen 
50,000,000 
1,300 

Fen 
10,000,000 

Yen 
90,000,000 
3,500 

Total 

29,997,800 

30,065,227 

i,855 

49,998,700 

47,639,822 
970 

10,000,000 
10,001,258 

89,996,500 

Receipts: 

Amount  received 

"        deferred 

87,706,307 
2,825 

Total 

30,063,372 
3,134 

47,638,852 
4,044 

10,001,258 
134 

87,703,482 

Amount  received: 

Interest    on    deferred 

7,312 

Total 

30,066,506 

47,642,896 

10,001,392 

87,710,794 

2,  of  the  amendment  to  the  regulations  with  regard  to  con- 
solidated bonds,  promulgated  by  virtue  of  Imperial  Ordinance 
No.  46,  issued  on  June  16,  1888,  which  declares  that  "the 
Minister  of  Finance  is  authorized  to  issue  bonds  after  the 
price  of  the  Consolidated  Loan  bonds  is  fixed,  in  accordance 
with  the  current  market  price,  without  having  recourse  to 
general  subscriptions,  the  bonds  to  be  delivered  to  the  Bank  of 
Japan;  but  the  amount  and  the  price  of  the  bonds  so  issued 
must  be  published  by  the  Minister  of  Finance  on  the  day  after 
issue." 

In  regard  to  the  above  it  may  be  said  that  the  Minister  of 
Finance  fixes  the  price  of  such  bonds  as  he  may  think  proper, 
in  accordance  with  the  market  price  of  the  bonds  of  the  same 
kind  which  he  has  issued  before. 

One  of  the  extraordinary  special  loans  was  based  upon 
Imperial  Ordinance  No.  137,  of  October  1895  which  says: 
"The  grant  of  a  lump  sum  may  be  had  from  the  Treasury  for 
war  purposes  by  delivering  bonds  at  par  to  the  Bank  of 
Japan  who  will  deliver  them  to  purchasers  according  to  con- 
venience, no  transaction  to  be  for  less  than  50  yen."  This 
loan  was  issued  in  instalments  at  5  per  cent  interest  to  the 


SUPPLY   OF    WAR    FUNDS  73 

limit  of  10,000,000  yen,  which  was  part  of  the  100,000,000  yen 
loan  previously  arranged  to  be  issued  in  conformity  with  Law- 
No.  25  of  October  23,  1894,  known  as  the  Kosho  Loan,  based 
on  Order  No.  3  of  the  Treasury  Department,  October  4,  1895. 

As  the  said  loan  was  to  be  issued  in  place  of  a  grant  from 
the  Treasury,  either  the  War  or  the  Naval  Office  applied  to 
the  Bank  of  Japan  as  necessity  required,  and  the  bank  applied 
to  the  Minister  of  Finance,  who  then  issued  in  accordance 
with  the  second  clause  of  article  6  of  the  Consolidated  Bond 
Regulations  and  delivered  the  bonds  to  the  Bank  of  Japan, 
and  the  bank  paid  the  money  into  the  Treasury.  Moreover, 
as  to  certain  parts  of  the  war  budget  up  to  March,  1896,  it 
was  known  as  an  extraordinary  account,  as  both  the  War  and 
the  Naval  Office  decided  to  purchase  the  bonds  above  named. 
The  total  amount  of  issue  was  9,924,250  yen;  and  the  amount 
of  actual  receipts  was  9,734,205.15  yen,  being  9.132,756  yen  for 
the  War  Office,  and  791,500  for  the  Naval  Office.  But  in 
regard  to  the  purchase  the  special  account  for  war  purposes 
amounted  to  4,102,394.50  yen  and  the  amount  not  issued  was 
75.750  yen. 

Another  extraordinary  special  issue,  being  the  fourth  loan, 
was  for  25,000,000  yen  in  face  value  of  bonds  issued,  taken  up 
by  employing  funds  from  the  Deposits  Section  of  the  Treasury. 
The  details  with  regard  to  the  loan  are  given  on  page  74. 

Loans 

The  loans  for  extraordinary  war  expenses  were  based  on 
Imperial  Emergency  Ordinance  No.  143.  issued  on  August  13, 
1894,  which  says:  "In  order  to  meet  the  expenses  of  Korean 
affairs  the  government  is  hereby  authorized  to  borrow  money, 
as  an  urgent  measure,  from  the  Bank  of  Japan."  Although 
this  power  was  not  used  at  the  time,  it  authorized  the  govern- 
ment to  make  up  a  temporary  shortage  by  borrowing  from  the 
central  bank  to  help  out  the  war  funds.  Again,  by  virtue  of 
Law  No.  25  issued  on  October  23,  1894,  ,,lr  government 
floated  a  public  loan  to  the  limit  of  100,000,000  yen  at  less 
than  6  per  cent  interest,  at  the  same  time  borrowing  money 


74 


EXPENDITURES   OF   THE   SINO-JAPANESE   WAR 
Fourth  War  Loan 


Issues 

Date 

Amount  of 
issue 

Price 

Amount  actu- 
ally issued 

1895 

Yen 

Yen 

Yen 

Third 

Oct.    16 

90,000 

100.50 

90,450 

" 

Oct.    25 

1 50,000 

100.20 

150,300 

u 

Oct.    30 

40,000 

100  30 

40,120 

ii 

Oct.    31 

30,000 

100.30 

30,090 

" 

Nov.    8 

400,000 

100.30 

401,200 

" 

Nov.  14 

50,000 

100.70 

50,35O 

a 

Nov.  19 

262,500 

101.10 

265,388 

il 

Nov.  28 

328,000 

101.90 

334.232 

ii 

Dec.     9 

60,000 

1 02 .60 

61,560 

" 

Dec.   13 

250,000 

102.50 

250,250 

ii 

Dec.   25 

2,037,000 

101  50 

2,067,555 

ii 

Dec.  27 

350,000 

101.40 

354,900 

1896 

ii 

Apr.      2 

50,000 

98.90 

49.450 

" 

Apr.      6 

30,000 

98.90 

29,670 

June  29 

500,000 

100.20 

501,000 

II 

Sept.  26 

300,000 

98.70 

296,100 

1 1 

Dec.    16 

500,000 

98.36 

491,800 

1897 

II 

Feb.    26 

300,000 

99-49 

298,470 

" 

.Mar.    3 

600,000 

99.04 

594,240 

" 

Mar.  26 

400,000 

99.14 

396,560 

1 1 

Oct.    14 

600,000 

95-83 

574-98o 

Dec.   21 
1898 

1 ,000,000 

93-15 

931,500 

" 

Feb.     7 

45.000 

9348 

42,066 

" 

Mar.  12 

1 ,200,000 

91.32 

1,095,840 

" 

Mar.  30 

3,000 

89.94 

2,698 

" 

Oct.    24 

48,000 

92.51 

44.405 

Dec.  28 
1899 

57-750 

92.98 

53.696 

ii 

Mar.  15 

28,000 

95-84 

26,751 

" 

Mar.  28 

130,000 

94.81 

123,253 

Oct.     13 

20,000 

95    8 

19,096 

1900 

ii 

Mar.  27 

60,000 

92.84 

55.704 

Sept.  28 

3,000 

90.71 

2,721 

Oct.    15 

2,000 

90.51 

1,810 

Total 

9,924,250 

9,728,205 

Fourth 

Mar.  4. 
1896 

25,000,000 

100.00 

25,000,000 

Total 

^4,924.250 

34,728,205 

SUPPLY   OF    WAR    FUNDS 


/0 


from  the  Bank  of  Japan,  the  amount  being  used  for  extraor- 
dinary war  expenses.  By  virtue  of  Law  Xo.  8  of  March  2, 
1895,  the  government  borrowed  money  under  the  same 
conditions  as  above.  A  loan  of  20,500,000  yen  was  raised  by 
authority  of  Law  No.  25  and  a  loan  of  20,260,006  yen  on  Law 
No.  8,  the  total  being  40,760,000  yen,  but  there  was  no  loan 
caused  by  urgent  measure. 

The  above  loans  were  fixed  and  issued  by  contract  papers 
stating  the  amount  of  the  loan,  or  by  special  orders  delivered 
as  necessity  required.  It  was  after  the  example  of  the  tem- 
porary Loan  Law  No.  16  of  February  20, 1894,  which  authorized 
borrowing  from  the  Bank  of  Japan  at  reasonable  interest  to 
make  up  temporary  deficits  within  any  one  fiscal  year.  There 
were  two  methods  of  obtaining  the  money :  one  by  fixed  loan 
and  the  other  by  current  loan.  The  fixed  loan  is  at  a  fixed 
rate  of  interest,  the  amount  of  the  loan  and  terms  of  redemp- 
tion being  arranged  by  contract  paper  or  by  command  of  the 
Minister  of  Finance.  The  current  loan,  on  the  other  hand,  is 
raised  on  security  of  money  forwarded  from  the  treasuries  at 
different  places  in  the  Empire  to  the  central  cash  office  in 
Tokyo  or  the  branch  cash  office  in  Osaka,  the  interest  for  the 
loan  being  the  same  as  the  daily  rate  for  overdrafts  in  the 
Bank  of  Japan.  The  loan  referred  to  in  this  paragraph  was  a 
fixed  loan. 

The  details  of  the  loans  based  on  Laws  No.  25,  1894,  and 
No.  8,  1895,  are  as  follows: 


Loan  Based  on  Law  Xo.  25,  1894 


Date  of  issue 

Amount 

Annual  rate 
of  interesl 

Hate  of 
redemption 

Nov.     15,  1894 

Nov.     26,  1894 

Yen 

8,000,000 
1,500,000 
3,000,000 
3,000,000 
2,000,000 
3,000,000 

Per  cent 
5 

5 
5 
5 
5 

5 

Mar.  31,  1S95 

Dec.      io,  1894 

<■ 

Dec.      15,  1894 

Feb.        1,  1895 

Feb.        6,  1895 

■• 

Total 

20,500,000 

76  EXPENDITURES   OF   THE    SINO-JAPANESE    WAR 

Loan  Based  on  Law  No.  8,  1895 


Date  of  issue 

Amount 

Annual  rate 
of  interest 

Date  of 
redemption 

Nov.  14,  1895 

Yen 

2,000,000 
1 ,000,000 
1 ,500,000 
1 ,000,000 
1 ,000,000 
1 ,000,000 
1 ,000,000 
1 ,000,000 
2,000,000 
1 ,000,000 
1,000,000 
1 ,000,000 
1 ,000,000 
760,000 
500,000 
1 ,000,000 
1 ,000,000 
1 ,500,000 

Per  cent 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 
6 

Dec.      31,  1895 

1  >ec.     2,  1895 

Dec.      t,,  i8qs 

>• 

Dec.      9,  1895 

" 

Dec.    12,  1895 

» 

Dec.    18,  1895.  . 

«< 

Dec.    25,  1895 

<■ 

Dec.    26,  1895 

" 

Dec.    28,  1895 

Jan.     22,  1896 

Mar.      31,  1896 

Jan.     28,  1896 

Mar.      5,  1896 

" 

Mar.   27,  1896 

<< 

Mar.  31,  1896 

"a 

Mar.  31,  1896 

June     30,  1896 

Apr.       1,  1896 

Apr.       1,  1896 

•1 

Apr.      6,  1896 

" 

Total 

20,260,000 

»  Date  of  redemption  prolonged  to  June  30,  1S96,  by  order  of  the  Minister  of  Finance. 

As  already  described,  the  above  loan  for  extraordinary  war 
expenses  was  a  temporary  measure,  and  in  accordance  with 
the  receipts  of  the  war  loan  was  to  be  redeemed  gradually. 
Although  March  31,  1895,  was  the  date  set  for  redemption  of 
the  20,500,000  yen  loan  raised  by  Law  No.  25  in  1894,  the 
battle  line  extended,  with  consequent  increase  of  outlay,  so 
that  it  was  quite  impossible  to  undertake  redemption  as 
promised.  Therefore,  the  Minister  of  Finance  gave  notice  of 
the  postponement  of  redemption  to  the  Bank  of  Japan, 
naming  June  30  of  the  same  year  as  the  date  set  for  redemp- 
tion. However,  by  April  the  cash  on  hand  in  the  Treasury 
had  increased  to  such  an  extent  that  3,000,000  yen  of  the  loan 
was  paid  off,  which  was  the  first  redemption  of  loans  from  the 
Bank  of  Japan.  Thereafter  redemption  took  place  frequently 
at  the  convenience  of  the  Treasury,  although  sometimes 
redemption  had  to  be  postponed,  not  being  completed  until 
May,  1896. 


SUPPLY    OF    WAR    FUNDS 


11 


The  loan  based  on  Law  Xo.  8  of  1895  was  redeemed  in  May, 
1896,  after  having  been  postponed  frequently,  like  the  former 
loan.     The  details  of  the  loan  follow: 


Date  of  redemption 

Amount  of  redemption 

Total 

By  Law  25 

By  Law  8 

Apr.     18,  1895 

May      1,  1895 

May    15,  1895 

Feb.      3,  1896 

Yen 

3,000,000 

2,000,000 

3,000,000 

920,000 

1,310,000 

4,130,000 

1,300,000 

440,000 

700,000 

160,000 

2,020,000 

1 ,460,000 

:n,:t 

)0,000 

Yi  n 

3,000,000 

2,000,000 

3,000,000 

920,000 

1,310,000 

4,130,000 

1,300,000 

440.000 

7' ".000 

1 60,000 

2,020,000 

2  1. 7^0,  OOO 

Feb.      8,  1896 

Mar.     2,  1896 

Mar.   26,  1896 

Mar.  26,  1896 

Mar.  31,  1896 

Apr.    22,  1896 

May    14,  1896 

May    20,  1896 

Total 

20,500,000 

20  26«  non 

4<),760,000 

The  payment  of  interest  for  the  loan  stood  as  follows: 


I  iscal  years 


l'.\  law  No.  25 
in  1894,  5', 
per  annum 


By  law  No.  8 
in  1895 
per  annum 


Total 


1894 

1895 

1896 

Total 


Yen 
304.384 
505.274 
144.366 


954,024 


Yen 

40.685 
359.549 


400,234 


Yen 

304,384 

545.959 

503.915 


[  ,354 


Employmeni  01   Indemnity 

The  amount  transferred  from  the  sum  received  as  indemnity 
from  China  to  the  fund  for  making  up  war  expenses  was  82,- 
171,650  yen,  the  details  being  as  follow-: 


78 


EXPENDITURES   OF   THE    SINO-JAPANESE    WAR 


Items 


Transferred  to  special  account  for  war  pur- 
poses   

War  and  transportation  expenses  for  fiscal 
year  1897-1898 

fotal 


82,171,650 


The  amount  of  Chinese  indemnity  received  for  the  fiscal 
year  1895  was  74,143,054  yen  for  war  indemnity,  44,907,449 
yen  as  compensation  for  the  retrocession  of  the  Liaotung 
peninsula,  and  the  sum  of  93,624  yen  as  the  profit  realized  by 
utilizing  the  paid-in  indemnity  and  the  marginal  profit  gained 
from  the  exchange  rates  in  Japan's  favor,  or  119,144,177  in 
all.  As  first  it  was  intended  that  the  indemnity  should  be 
devoted  to  extension  of  the  army  and  navy.  But  as  it  was 
necessary  to  bring  the  special  accounts  for  the  war  with  China 
to  a  close  at  the  end  of  March,  1896,  and  a  public  loan  or  a 
loan  of  over  100,000,000  yen  from  the  bank  would  be  required 
to  do  so,  it  was  decided  to  use  some  of  the  indemnity  to 
balance  the  account,  rather  than  leave  the  war  expense  to 
depend  on  public  loans  and  perhaps  greatly  disturb  the 
money  market,  while  at  the  same  time  an  idle  surplus  would 
be  piling  up  in  the  Treasury.  Moreover  the  interest  on 
public  loans  had  to  be  met.  Consequently  some  of  the  in- 
demnity was  diverted  to  war  expenses,  leaving  armament 
expansion  to  future  loans.  The  portion  of  indemnity  used  in 
this  way  was  78,957,164.89  yen,  while  J, 210, 000  yen  was  used 
during  the  twro  fiscal  years  of  1897  and  1898  for  repletion 
of  war  funds. 


PART  II 

ECONOMIC  EFFECTS  OF  THE 
SINO-JAPANESE  WAR 


CHAPTER   I 
INTRODUCTION 

There  are  two  distinct  points  of  view  from  which  the 
economic  effects  of  war  may  be  studied.  The  first  includes 
the  effects  upon  the  ordinary  life  of  the  nation,  and  the  second 
the  effects  upon  national  economics  and  finance.  This  latter 
includes  the  study  of  the  methods  of  securing  funds  for  prose- 
cuting the  war,  rehabilitating  old  industries  and  starting  new 
ones  after  the  war,  and  meeting  the  changes  which  result  from 
the  fluctuation  in  the  exchange  value  of  money.  Of  these 
latter  changes  we  may  mention  (i)  the  tightening  of  the 
money  market  caused  by  large  bond  issues;  (2)  the  inflation 
of  the  currency  due  to  purchase  of  war  supplies,  etc.;  (3)  the 
rise  in  prices  caused  by  the  war,  increase  in  taxes,  and  inflation 
of  the  currency;  (4)  the  increase  or  decrease  in  individual 
incomes  caused  by  financial  instability,  etc.,  and  (5)  the 
increase  in  speculation  due  to  the  foregoing  causes. 

These,  then,  are  the  general  economic  effects  of  war  to  be 
considered,  and  certainly  the  Sino-Japanese  War  was  no  ex- 
ception, since  all  of  the  foregoing  phenomena  were  to  be 
observed  during  and  after  that  conflict.  This  fact  must  be 
noted,  how (Acr, — that  it  was  the  first  international  war  in  the 
history  of  modern  Japan,  i.e.,  since  the  beginning  of  the 
Meiji  Era.  Only  a  quarter  of  a  century  had  elapsed  since 
great  changes  had  taken  place  in  our  government,  and  tin-; 
quarter  of  a  century  therefore  can  not  be  considered  a  strictly 
normal  period.  .Main-  serious  financial  problems  were  wait- 
in-  to  be  solved,  such  as  the  adjustment  of  debts  contracted 
during  the  feudal  or  Tokugawa  epoch,  the  securing  of  money 
for  the  various  needs  of  the  new  government  and  expenditure 
<»f  the  same,  and  the  disposal  of  a  large  number  of  inconvertible 
notes.  Moreover  the  new  government  was  beset  with  other 
difficulties — the  initial  conflicts  of  the  Restoration  period, 
7  81 


82  ECONOMK     EFFECTS   OF     NIK    SINO-JAPANESE   WAR 

the  civil  war  of  the  Southwest  (1877),  etc.  As  a  result, 
finances  became  constantly  more  difficult  to  manage,  and 
when  the  issue  of  inconvertible  notes  finally  reached  the 
highest  possible  point,  a  decline  in  value  set  in.  Only  when  a 
central  bank — the  Bank  of  Japan — had  been  established,  was 
the  agio,  or  difference  in  value  between  specie  and  notes, 
removed.  In  1883  a  monetary  standard  was  established 
which  was  virtually  silver,  although  by  statute  it  was  bi- 
metallic. Soon  thereafter,  owing  to  the  fluctuation  in  value 
of  silver  and  gold,  monetary'  complications  arose,  and  before 
these  had  been  settled  the  Sino-Japanese  War  broke  out. 
Then,  in  addition  to  the  internal  problems  with  which  we 
were  already  wrestling,  we  found  ourselves  face  to  face  with 
China  in  the  war  of  1894 — China  that  ancient  nation  with  the 
prestige  of  her  four  thousand  years  of  history  to  count  upon. 
For  a  nation  like  Japan,  economically  unsteady,  and  not  yet 
prepared  for  a  long  fight,  to  challenge  such  an  antagonist  was 
like  sweeping  the  sea  with  a  broom — an  impossible  task, 
indeed,  it  seemed!  So,  although  the  valiant  spirit  of  the 
people  made  up  for  the  shortage  of  material  supplies  to  some 
extent,  we  must  admit  that  our  power  of  continued  resistance, 
financial  and  economical,  was  very  weak,  and  that  the  effects 
of  war  upon  the  national  economics  and  finance  were  very 
severe. 

First,  let  us  proceed  to  consider  the  financial  effects  of  the 
war.  The  whole  expenditure  amounted  to  more  than  250,- 
000,000  yen.  Besides  this,  the  expenses  of  various  post-bellum 
undertakings  were  enormous,  so  that  the  people  had  to  endure 
a  constant  and  heavy  drain.  The  total  amount  of  the  Treas- 
ury's annual  disbursement  at  once  became  double  that  before 
the  war.  As  to  revenues,  taxes  had  not  been  materially  in- 
creased  in  order  to  meet  the  expenditure  during  the  war,  as 
this  was  largely  met  by  means  of  war  loans;  while  for  restoring 
normal  conditions  after  the  war  and  for  various  post-bellum 
undertakings  the  war  indemnity  secured  was  employed.  But 
this,  although  large,  was  not  sufficient,  and  it  was  necessary 
therefore  to  increase  the  taxes  and  to  float  loans  in  addition. 


INTRODUCTION  83 

In  consequence,  the  whole  nation,  and  economic  circles  in 
particular,  became  heavily  burdened. 

Next,  let  us  consider  the  general  economic  effects  of  the 
war.  In  the  first  place,  owing  to  the  issue  of  war  bonds  the 
money  market  was  greatly  tightened,  but  after  victory  was 
secured  the  conditions  improved.  After  the  war,  the  govern- 
ment and  the  Bank  of  Japan  began  to  lend  capital.  By 
changing  a  virtual  silver  standard  into  a  gold  standard,  the 
barrier  to  the  free  circulation  of  capital  between  Japan  and 
the  gold-standard  nations  was  removed,  and,  with  a  view  to 
perfecting  financial  facilities,  hypothec  and  industrial  banks 
were  established.  The  loan  power  of  the  Bank  of  Japan  was 
extended.  The  national  banks,  which  so  far  had  been  an 
incubus  upon  industry,  were  transformed  into  ordinary  banks. 
These  steps  facilitated  the  circulation  of  capital  and  helped 
considerably  to  ease  the  money  market.  But  this  easy 
condition,  together  with  the  craze  for  speculation  rife  among 
a  people  drunk  with  victory,  caused  a  great  financial  panic 
which  subsided  only  in  1 903-1 904. 

Secondly,  as  a  result  of  issuing  bonds  during  the  war,  and 
increasing  taxes  and  notes  as  a  measure  of  relief  for  the 
financial  world,  the  volume  of  currency  was  considerably  en- 
larged and  the  prices  of  commodities  in  general  rose,  the  more 
so  as  the  money  market  before  the  war  had  been  tight  and  the 
entire  amount  of  currency  small. 

To  take  another  point  of  view,  let  us  consider  that  the 
Sino-Japanese  War  was  the  first  international  war  which 
Japan  had  fought  in  modern  times  and  that  the  people  were 
unaccustomed  to  such  experiences  as  they  were  then  having. 
In  addition,  mindful  of  the  dangers  of  fighting  against  this 
vast  and  ancient  empire,  they  were  entertaining  grave  anx- 
ieties as  to  the  future.  Fortunately  for  Japan,  the  war  ended 
in  a  glorious  victory  for  her  so  that  the  people  came  to  realize 
that  the  efforts  made  during  the  quarter  of  a  century  past  had 
not  been  made  in  vain.  They  were  then  fired  with  ambition 
to  exert  more  energy  along  the  line  of  national  endeavor,  so 
that  Japan  might  extend  her  power  in  the  Far  East,  and  to 


84  ECONOMIC    EFFECTS    OF    THE   SINO-JAPANESE   WAR 

this  end  the  government  and  people  cooperated  in  various 
post-bellum  undertakings.  Means  of  communication  and 
transportation,  as  well  as  financial  organs,  were  perfected, 
educational  institutions  were  improved,  industries  encouraged, 
various  facilities  to  develop  foreign  trade  established,  and  the 
system  of  encouraging  shipbuilding  and  navigation  by  sub- 
sidies or  grants  of  money  was  established.  Thus  the  com- 
mercial standing  of  the  nation  was  improved  and  industry, 
commerce,  communication  and  various  hitherto  undeveloped 
enterprises  were  revolutionized  so  as  to  fit  in  with  the  new 
period,  and  therefore  any  discussion  of  the  effects  of  the  war  is 
really  identical  with  an  historical  statement  of  the  progress 
made  in  these  national  activities.  As  for  the  increase  or 
decrease  in  individual  incomes,  such  are  the  inevitable  results 
of  wars  and  other  great  cataclysms  of  society.  Especially  is 
this  true  when  the  stock  market  is  favorable,  following  the 
inception  of  post-bellum  enterprises  by  the  government  and 
people.  After  the  Sino-Japanese  War  great  changes  in 
private  incomes  were  particularly  common. 

The  foregoing  various  phenomena  were  important  results  of 
the  war.  But  what  is  to  be  considered  as  the  most  important 
result  was  the  effect  of  the  war  upon  the  life  of  the  people. 
This  was  felt  for  a  very  much  longer  period  than  other  effects. 
The  expenditure  for  the  Sino-Japanese  War  was  about  250 
million  yen.  But  we  must  also  take  into  consideration  the 
indirect  losses  suffered  on  account  of  the  war,  the  expenditure 
required  to  restore  normal  conditions  after  the  war,  and  the 
capital  employed  for  various  post-bellum  undertakings.  When 
these  losses  and  expenses  are  added  together,  the  amount 
reaches  an  enormous  figure.  This  amount  could  be  tempo- 
rarily met  to  be  sure  by  means  of  bond  issues,  loans  secured 
from  the  central  bank,  the  sale  of  government  property,  and 
contributions  by  the  people  (especially  during  the  war),  etc. 
But  in  the  long  run  it  had  to  be  met  by  revenue  from  taxes 
(direct  and  indirect),  and  the  result  was  (1)  an  increase  in  the 
burdens  borne  by  the  people  by  the  establishment  of  new  and 
the  increase  of  old  taxes;  (2)  the  permanent  inflation  of  the 


INTRODUCTION  85 

currency;  and  (3)  a  rise  in  the  prices  of  commodities,  etc. 
The  difference  between  rich  and  poor  then  became  more 
noticeable,  the  difficulty  of  living  on  the  part  of  the  majority 
of  the  people  and  also  their  discontent  increased,  while  social 
and  political  transformations  consequent  upon  the  foregoing 
phenomena  took  place.  These  changes,  indeed,  constitute 
the  most  important  problem  for  study. 

The  increase  in  the  burdens  of  the  people,  the  inflation  of 
the  currency,  and  the  rise  in  the  prices  of  commodities  were 
all  actual  phenomena  observed  after  the  Sino-Japanese  War. 
Fortunately  in  Japan  wages  for  labor  and  the  other  sources  of 
income  of  the  people  rose  in  proportion  to  the  rise  in  pri< 
so  that  the  evil  effects  of  the  change  were  not  felt  so  very 
sharply.  But  the  increase  in  the  difference  between  rich  and 
poor  and  the  difficulty  of  living  for  the  majority  became  more 
and  more  well-defined  facts,  so  that  farmers  began  i<>  leave 
their  homes  and  flock  to  cities  or  manufacturing  town-.  The 
beauty  and  simplicity  of  country  life  which  had  generally 
prevailed  before  was  gone  and  the  country  districts  were  left 
to  decay.  Concentration  of  the  population  in  cities  tended  t<  > 
increase  the  difficulty  of  living.  But  as  Japan  has  only 
recently  been  opened  to  Western  civilization,  and  is  situated  in 
the  Far  East  where  the  civilized  nations  of  the  west  are  con- 
centrating their  energy  upon  conquest,  she  has  been  so  busily 
engaged  in  establishing  herself  as  an  independent  power  that 
she  has  not  yet  had  time  to  pay  proper  attention  to  the 
question  of  living  as  it  concern-  the  generality  of  the  people. 
Consequently,  the  burdens  of  the  people  increased  considerably 
after  the  Sino-Japanese  War,  and  even  yet  they  can  not 
enjoy  the  happiness  of  perfect  li\  ing  conditions.  Yet  this 
state  of  affair-  was  the  natural  result  of  the  geographical 
position  of  Japan,  and  it  may  not  be  strictly  true  to  say  that 
it  was  a  direct  result  of  the  Sino-Japanese  War.  But  .1- 
international  diplomatic  relations  of  Japan  assumed  more 
importance,  with  the  Si  no- Japanese  War  as  the  Starting  point, 
and  as  it  was  this  war  which  exposed  the  weakness  of  China 
and  thereby  encouraged  the  Western  Tower-  to  bring  pressure 


86  ECONOMIC    EFFECTS    OF   THE    SINO-JAPANESE    WAR 

to  bear  upon  the  East,  our  statement  in  the  foregoing  para- 
graph may  be  seen  to  be  a  correct  one.  We  shall  now  go  into 
more  detail  as  to  each  of  the  phenomena  mentioned  above, 
expressing  our  views  in  concrete  form  in  order  to  show  how 
far  reaching  the  effect  of  the  Sino-Japanese  War  was  upon  our 
economic  world. 


CHAPTER   II 
EFFECTS   OX   PUBLIC   FINANCE 

The  effects  of  the  Sirio-Japanese  War  on  public  finance  were 
most  directly  shown  in  the  annual  budgets  of  the  government. 
We  shall  therefore  present  tables  giving  the  annual  budgets 
from  1893,  the  year  before  the  Sino-Japanese  War,  t<  1  [903,  the 
year  before  the  Russo-Japanese  War,  in  order  to  show  the  influ- 
ence of  the  former  war  upon  the  annual  budgets  of  the  nation. 
Annual  Revenue,  1893-1903 


Fiscal  Year 


Ordinary 


Extraordinary 


1893 

i894 

1895 

1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 

Total 


Yen 

85,883,080 

89,748,454 

95,444,652 

104,904,501 

124,222,964 
132,869,336 

192,170,081 
202,035,100 
221.240,408 
224,180,699 


Yen 
27,886,300 

8,421,574 
22,988,069 
82,114,022 

102,167,159 
87,184,792 
76,925,996 

103,684,787 

72,323,950 

76,101,016 

10,059 


650,027,803 


: 


\wi  m.  Expenditures,  1893-1903 


Fiscal 


1893 

1895 

1896 

1897. 

1898. 

1899. 

1900 

1 901  . 

1902. 

1903 


Total. 


<  Irdinary 


Yen 

'■4.545.599 
60,421,346 
'■7.1  |.8,007 
[00,7I2,8l6 
[07,695,127 
1 19,072.144 
1  $7,590,418 

1  iw.i.vi.i": 
[60,363,583 
171,05 
169,761,91 1 

307.5" 


Extraordinary 


Yen 
20,036,273 

I7.7<>7.297 
18,169,173 
68,3  ; 

1  [5.983.717 

100,(1*5,42  i 
1 16,575,120 
[43,615,892 
106,493,241 

1 18,  K>(i.  <,J3 
14.217 


Total 


Vtii 
1  1  $,769,380 
98,170,028 
118,452.721 
187.oiw.125 
226,390.125 
220,054,128 
254,254,524 
295,854,868 
274.359.050 
297,341,424 
260,220  758 


Total 


Yen 

84.581,872 

78,128,643 

85,317,180 

168,856,508 

223,678,844 

219.757.568 

254,165,538 

292,75 

26,731 
249.596,131 

1. 2 1 2, (j  1 5.898 


87 


8S 


ECONOMIC     II  I  1  .<  TS   OF   THE    SINO-JAPANESE    WAR 


Taking  the  figures  for  1893  as  100,  the  percentages  of  the 
figures  for  the  other  years  will  be  as  follows: 

Annual  Revenue  and  Expenditures,  1893-1903,  in  Percentage 


1  is  al  j  ear 


1893 
1894 

1895 

!*(,(, 

1897 
I898 
I899 
I900 
I90I 
I902 
1903 


k<-\  enue 


1  >rdinary 


100.  o 

104.5 
1  r  1  . 1 

122 

144 

154 
206 
223 
235 
257 
261 


Extraor- 
dinary 


100. o 
30.2 
82.4 

294  5 

366.4 
312.6 

275-9 

371    8 

259  -4 
272.9 

129.2 


Total 


100.  o 
86.3 
104. 1 
164.4 
199.0 

193-4 
223.5 
260. 1 
241  .2 
261  .4 
228.7 


Expendit  ures 


Ordinary 


1 00.0 
93-6 

104.0 
156.0 
166.9 
184.4 

213. 1 
231  .1 
248.5 
265.0 
263.0 


Extraor- 
dinary 


90. 
34°  ■ 
578. 
502 
58l 
716. 

531 

589- 

398. 


Total 


0 

100. 

4 

92. 

7 

100. 

1 

199. 

9 

283 

5 

259 

8 

300 

8 

346 

5 

315 

8 

342 

4 

295 

The  foregoing  tables  show  that  the  annual  budget  which 
was  84  million  yen  in  1897  became  twice  as  big  after  the  war, 
that  is,  over  168  million  yen.  It  increased  gradually  until  in 
1903  it  reached  over  249  million  yen,  that  is,  an  increase  of  195 
per  cent.  Now  what  was  the  cause  of  this  increase  in  ex- 
penditure, and  from  what  source  was  the  revenue  to  come  to 
offset  it?  To  make  this  clear  will  be  to  make  clear  the  effects 
of  the  war  upon  finance. 

The  Sino-Japanese  War  was,  as  stated  above,  the  first  in- 
ternational war  which  Japan  had  waged  since  the  Restoration 
of  Meiji.  Abroad  it  raised  the  status  of  Japan  and  proved 
her  to  be  in  reality  the  protector  of  the  safety  and  peace  of 
the  Far  East,  and  thus  gave  her  an  established  position  among 
the  great  powers  of  the  world.  At  home,  it  enabled  her  to 
realize  her  own  power,  through  the  experience  of  a  continental 
war,  and  at  the  same  time  gave  her  the  opportunity  to  rise  in 
power,  through  victory  in  this  war,  in  accordance  with  the 
forward  policy  laid  down  at  the  time  of  the  Restoration.  Even 
the  tragic  incident  at  the  close  of  this  war,  the  interference  by 
the  three  European  Powers,  was  only  an  added  incentive  to  the 


EFFECTS    OX    PUBLIC    FIXAN<  I  89 

nation  to  exert  her  utmost  energy  for  the  development  of 
national  power  and  the  replenishment  and  expansion  of  the 
provisions  for  national  defense.  Naturally  the  expenditures 
greatly  increased,  because  an  enormous  amount  of  money  was 
needed  at  the  time  of  the  war,  not  only  for  war  expenses  hut 
also  for  the  increase  in  the  ordinary  administrative  expenses 
owing  to  the  war,  and  again  after  the  war  to  repay  the  princi- 
pal and  interest  of  the  various  war  bonds.  These  were 
assuredly  the  reasons  why  the  annual  national  budget  in- 
creased so  much  after  the  Sino-Japanese  War. 

The  effects  of  the  war  upon  national  finance  may  be  dis- 
cussed under  two  headings — 

(1)  Securing  of  a  war  fund  and  readjustments  incident 
thereto. 

(2)  Post-bellum  enterprises. 

The  first  of  these  two  points  was  discussed  in  detail  in  the 
third  Chapter  of  Part  I,  under  the  heading  "Supply  of  War 
Funds,"  so  we  shall  omit  it  here.  We  might  remark  here, 
however,  that  the  only  item  under  this  head  which  caused 
financial  trouble  in  later  days  was  the  issue  of  war  bond-.1 
The  redemption  and  interest  payments  on  these  bonds  were 
completed  in  July,  1910.  We  shall  discuss  this  matter  in 
detail  in  the  next  section. 

As  for  the  enterprises  undertaken  after  the  war,  they  were 
many  and  various.  The  chief  items  were  (I)  rehabilitation 
and  expansion  of  the  army  and  the  navy  f  the  latter  on  a  scale 
commensurate  with  the  change  in  the  national  status  after 
the  war)  and  the  establishment  of  an  iron  foundry;  (2)  im- 
provement of  educational  institutions  in  order  to  cherish  and 
develop  the  national  strength,  increase  of  legations  abroad, 
river  repairs,  railway  construction  and  improvement,  exten- 
sion of  the  telephone  system,  expansion  of  foreign  trade, 
subsidies  for  shipbuilding,  encouragement  of  navigation  and 
extension  of  sea  traffic,  readjustment  of  the  monetary  system, 
perfecting  of  financial  facilities  and  agricultural  institutions, 

1  Amount  of  bonds  issued,  124,920,750  yen;  amount  actually  received,  [22,437,- 

687  yen. 


90  ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 

colonial  development  of  Hokkaido,  and  the  establishment  of 
various  facilities  for  the  government  of  the  newly  acquired 
territories.  In  order  to  put  the  foregoing  plans  into  execution, 
the  government  approved  the  national  budget  outlined  below: 

1.  Plan  to  meet  the  increase  in  expenditure  after  1896: 

(a)  As  sources  of  revenue  to  meet  ordinary  expenditure  due 
to  post-bellum  undertakings,  a  sake  tax,  a  business  tax,  and  a 
registry  tax  shall  be  levied,  and  a  leaf  tobacco  monopoly 
established. 

(b)  For  army  and  navy  expansion  and  for  the  establishment 
of  a  new  iron  foundry,  a  part  of  the  indemnity  collected  from 
China  was  to  be  used. 

(c)  As  sources  of  revenue  for  railway  and  telephone  im- 
provement or  extension,  bonds  were  to  be  issued. 

2.  Plan  to  meet  the  war  expenditure,  dispose  of  the  in- 
demnity received  from  China  and  provide  a  budget  system 
for  Formosa: 

(a)  As  the  indemnity  was  collected  from  China  in  yearly 
instalments,  it  seemed  wise  to  appropriate  the  money  for  use 
in  a  continuation  plan  embracing  a  certain  number  of  years. 
Thus  the  indemnity  was  appropriated  for  the  redemption  of 
war  debts,  army  and  navy  expansion,  the  establishment  of  an 
iron  foundry,  a  reserve  fund  for  emergencies  and  a  subsidy  to 
the  Bank  of  Agriculture  and  Industry. 

(b)  The  annual  budget  for  Formosa  was  to  be  separated 
from  the  general  accounts  of  the  central  government  and  a 
plan  worked  out  relative  to  annual  revenue  and  expenditure 
which  should  be  instituted  to  enable  Formosa  gradually  to 
establish  a  system  of  self-government. 

3.  Plan  to  extend  facilities  for  transportation,  communica- 
tion and  finance: 

(a)  Bonds  were  to  be  issued  to  meet  the  expense  of  im- 
provement and  extension  of  railways  and  telephones. 

(b)  The  service  capacity  of  the  Bank  of  Japan  and  the 
Yokohama  Specie  Bank  were  to  be  enlarged  and  in  addition 
a  hypothec  bank  and  banks  of  agriculture  and  industry  were 
to  be  established. 


EFFECTS   ON    PUBLIC    FINANCE 


91 


We  shall  now  briefly  consider  the  amount  required  and  the 
resources  available  for  the  fund  to  earn,-  out  the  proposed 
plans,  including  the  extension  of  the  means  of  national  de- 
fense, the  perfection  of  railway  and  telephone  systems,  the 
establishment  of  a  new  iron  foundry,  and  especially  the 
encouragement  of  navigation. 

Table  I  at  the  end  of  this  chapter1  and  the  following  tables 
will  give  a  fair  idea  of  the  effects  of  the  Sino-Japanese  War 
upon  our  national  finance  as  a  whole. 

Comparing  the  total  amounts  in  Table  I1  with  the  total 
annual  expenditure,  we  see  that  in  ten  years  these  amounts 
actually  correspond  (in  average)  to  approximately  28.29  per 
cent  of  the  total  annual  expenditure. 

Comparison    of    Expenditures    for    Post-bellum    Enterprises    with    the 
Total  Annual  Expenditures 


Fiscal  year 

Total  expenditure 
for  principal  post- 
bellum  enterprises 

Total  annual 
expenditures 

Percentage  of  post- 
bellum  expenses  to 
total  annual  ex- 
penditures 

1894 

1895 

1896 

1897 

1898 

Yen 

2,827,)'.; 

5,279,892 

29,303,746 

85,048,595 

94,813,702 

112,062,975 

118,639,050 

98,278,837 
75,965,524 

67,i37.<x>5 

Yen 

78,128,643 

85,3i7.i7'» 
168,856,509 
223,678,844 

2i9.757.569 
254,165,528 
292,750,059 
266,856, 82  \ 
289,226,731 
249,5.)'..  1  p 

Per  cent 
3.62 
6.19 

17-35 
38.02 

43   M 
44.09 

40.53 
36.83 
26.  27 
26  90 

1899 

1 900 

1901 

1902 

1903 

Total 

689,356,7s'' 

2,128,334,017 

28.29* 

'  Av.  I 

In  order  to  secure  t His  large  amount,  the  government,  as 
stated  before,  adopted  the  measures  of  increasing  taxes,  issuing 
bonds  and  transferring  the  war  indemnity.  The  following 
table  will  show  the  most  important  items  of  revenue:8 

1  Post,  p.  141. 

2  The  figures  for  the  revenue  from  ne\vl\  established  taxes  were  taken  from  the 
actual  receipts  and  the  figures  for  the  old  taxes  whos<  rates  were  raised  were 
taken  from  the  estimate  of  the  expe<  ted  incn 

The  revenue  from  the  bond  issues  me. ms  the  revenue  from  the  bonds  issued  for 
the  railways,  the  industries,  the  Hokkaido  railways  and  the  Formosan  enterpi 


92  ECONOMK      I  I  M<   IS   OF   THE   SINO-JAPANESH    WAR 

Revenue  foh  Post-bellum  Enterprises 


I  iscal  year 

Kc\ enue  from 

increase  oi 

taxes 

Transfer  of 
indemnity 

fund 

Issue  of 
bonds 

Total 

1896 

'  897 

[898    

[899    

1900 

1 90 1 

1902 

1903 

Yen 

i,s,7<>8.589 
29,701,472 
35.6i7,ioo 
63,810,962 
85,710,491 
90, 104,052 
95.621,115 
100,073  693 

Yen 

11,789,389 
40,360,796 
46,187,071 
32,636,905 
31,240,140 
20,883,427 
13.866,937 
9,514.215 

Yen 
2,796,600 

36,389.8/4 
35,352,806 
35,166,404 
38,139.599 
31.721,764 
12,741,033 
6,881,256 

Yen 

30,294,578 

106,452,142 

H7,i56,977 
131,614,271 
155090,230 
143,009,243 
122,229,085 
1 16,469,164 

Total  .  .  . 

516,647,474 

206  478,880 

199,189,336 

922,315,690 

With  the  expansion  of  the  general  national  finance  owing  to 
the  aforesaid  causes,  the  expenditure  of  the  local  governments 
naturally  increased  in  proportion.  Table  II  at  the  end  of 
this  chapter1  was  taken  from  the  report  of  the  investigation  of 
the  Home  Department  to  show  the  actual  condition  as  to 
expansion  of  revenue  and  expenditure  of  local  communities. 

The  cause  of  this  increase  in  expenditure  was  largely  due 
to  the  increase  required  for  construction  work,  encouragement 
of  industry  and  educational  enterprises,  because  of  the  policy 
adopted  by  local  communities  to  develop  the  national  re- 
sources and  industries  in  accordance  with  the  post-bellum 
plans  of  expansion.  According  to  the  Japanese  system  of 
government,  the  local  communities  (prefecture,  city,  borough, 
township,  village)  have  been  invested  with  complete  power  as 
legal  persons,  and  the  officials  in  these  local  communities, 
besides  performing  their  duties  to  the  communities,  are 
called  upon  for  the  additional  service  of  managing  the  various 
local  enterprises  entrusted  to  them  by  the  central  government 
and  of  supervising  the  expenditure  therefor.  With  a  change 
in  the  status  of  the  nation  the  duties  of  these  local  officials 
were  correspondingly  increased,  and  hence  the  increase  in 
local  expenditure.  Thus,  since  the  expansion  of  the  finance  of 
local  governments  inevitably  keeps  pace  with  the  advance- 

1  Post,  p.  142. 


EFFECTS   ON    PUBLIC    FINANCE  93 

merit  of  a  nation,  it  was  natural  that  with  the  national 
expansion  along  various  lines  after  the  Sino-Japanese  War,  an 
increase  in  local  expenditure  should  take  place  also. 

In  short,  after  the  Sino-Japanese  War,  Japan  spent  enor- 
mous amounts  for  central  and  local  administration  in  view  of 
the  post-bellum  enterprises,  that  is,  for  expansion  of  means  of 
defense,  development  of  resources  and  industries,  and  for 
improvement  of  education.  The  pressure  of  this  increase  of 
expenditure  upon  the  people  was  certainly  crushing.  This 
together  with  the  changes  caused  by  the  war  upon  economics 
in  general  produced  serious  effects  upon  the  economic  world, 
which  lasted  throughout  the  entire  period  in  which  the  post- 
bellum  enterprises  were  being  prosecuted,  as  we  state  more 
fully  later.  But,  on  the  other  hand,  our  fellow  countrymen, 
moved  by  the  new  self-realization  following  the  war,  and  by 
the  feeling  of  uncertainty  concerning  the  national  existence 
due  to  the  insult  inflicted  upon  us  by  the  interference  of  the 
triple  European  Powers,  rose  to  the  occasion,  and  sturdily 
resisted  the  paralyzing  pressure  of  circumstances.  We  have 
successfully  prosecuted  the  post-bellum  enterprises  started  by 
the  government,  mastered  all  difficulties  by  developing  the 
power  of  resistance,  and  Anally  raised  the  nation's  prestige  so 
high  that  within  the  short  period  of  ten  years  or  so  Japan  has 
risen  to  be  a  mighty  power  in  her  recently  enlarged  sphere 
in  the  Far  East.  This  fact  should  be  remembered  in  discuss- 
ing the  financial  expansion  of  the  nation.  This  indomitable 
spirit  asserted  itself  more  and  more  so  that  Japan  did  not 
retrograde  in  any  direction.  This  is  the  reason  win-  we 
have  peace  in  the  Orient,  a  fact  which  should  be  recorded  as 
in  the  nature  of  a  miracle. 

State  Finance 

We  have  briefly  reviewed  the  effects  of  the  Sino-Japanese 

War  upon  the  national  finance  in  general.  To  sum  up.  the 
expenditure  in  the  first  year  alter  the  war,  [896,  was  twice  as 
large  as  that  for  the  year  before  the  war,  [893,  and  three 
years  after,  in  [899,  it  was  three  times  as  large.    This  tendency 


94  I  <  ONOMIC    EFFECTS    OF    THE    SINO-JAPANESE   WAR 

to  increase  continued  steadily  until  the  year  1903  just  before 
the  Russo-Japanese  War.  Such  was  the  history  of  the 
expenditure.  As  for  the  revenue,  in  1897  it  was  twice  as 
large  as  in  1893,  and  the  tendency  to  increase  continued.  In 
1893  the  revenue  was  113,769*380.54  yen  and  the  expenditure 
84,581,871.56  yew;  that  is,  there  was  an  excess  of  29,187,508.97 
yen  of  revenue  over  expenditure,  so  that  the  rate  of  expansion 
of  the  revenue  in  later  years  was  not  so  extraordinary  as  that 
of  the  expenditure.  Table  III  at  the  end  of  this  chapter1  was 
compiled  to  show  these  facts. 

The  direct  effects  of  the  Sino-Japanese  War  upon  our 
finance  were  felt  in  securing  special  administration  funds 
for  the  war  and  in  connection  with  the  war  (hereafter  called 
war  expenses).  The  total  amount  of  these  expenses  was 
approximately  236  million  yen.  The  greater  part  of  this 
amount  was  secured  through  the  issue  of  war  bonds  and  the 
transfer  of  the  war  indemnity,  so  that  it  did  not  have  any  very 
serious  effect  upon  the  ordinary  revenue  of  the  nation,  as  we 
have  stated  before.2  Consequently  the  burden  of  the  war 
expenses  which  had  to  be  borne  afterward  was  confined  to  the 
redemption  of  the  war  bonds  and  the  payment  of  interest  on 
them.     We  shall  later  explain  this  point  in  detail. 

Thus  it  will  be  seen  that  the  greatest  effects  of  the  Sino- 
Japanese  War  upon  our  finance  were  in  connection  with  post- 
bellum  enterprises.  Of  those  undertaken  since  1896,  the 
chief,  as  stated  before,  were  the  enlargement  of  the  army  and 
navy,  the  establishment  of  an  iron  foundry,  the  building  and 
improvement  of  railways,  the  extension  of  the  telephone 
system,  the  extension  of  educational  work,  the  establishment 
of  the  Hypothec  Bank,  the  Banks  of  Agriculture  and  Industry 
and  the  Bank  of  Formosa,  enterprises  in  Formosa,  undertak- 
ings in  agriculture,  industry  and  commerce  and  the  adjust- 
ment of  water  courses.  All  these  enterprises  had  for  their 
object  the  perfecting  of  the  means  of  national  defense  and  the 
developing  of  the  wealth  of  the  nation.  We  shall  here  briefly 
describe  the  plans  for  these  post-bellum  enterprises. 

1  Post, p.m.  ■  Pt.  I,  Chap.  ill. 


EFFECTS   ON    PUBLIC   FINAN<  I  95 

(1)  According  to  the  documents  introduced  in  the  Diet, 
together  with  the  budget  in  1896,  the  post-bellum  enterprises 
were  planned  to  be  completed  in  ten  years,  from  1896  to  1905, 
with  the  amount  of  expenditure  estimated  at  about  587 
million  yen;  the  tax  system  was  readjusted,  a  part  of  the  war 
indemnity  was  to  be  transferred  to  the  fund  and  bonds  were 
to  be  issued  to  meet  the  remainder.     The  following  is  the  total 

expenditure  for  the  ten  years. 

...    .    . 

Total  Expenditure  fob  Period  1896-1905 

Expansion  of  means  of  defense:  Yen  Yen 

Army 205,802,866 

Navy 145,572,264 

~  _    .      ,  .  351.375.130 

Extension  ot  enterprises: 

Iron  foundry 4.095.793 

Railway  to  be  built  between  Sorachita  and  Asahig- 

awa i,i  78,330 

Improvement  of  existing  government  railway  lines     26,553,000 

Extension  of  telephone  exchange  system 12,802,102 

I  irsl  year's  interest  on  telephone  and  railway  bonds       1,278,080 
Establishment  of  bureaus  to  handle  leaf  tobacco 

and  capital 12,213,550 

...  58,120,855 

Expansion  ol  administrative  expenditure: 

Principal  and  interest  payments  on  loans 1 10,401,056 

Annual  salaries  of  soldiers,  rewards  and  pensions.  .  .    1 12,940,810 

Expense  of  collecting  increased  taxes I2>653.833 

Expenses  of  soldiers   stationed   in   Weihaiwei  and 

various  Formosan  expenses 27,500,000 

Subsidies  to  banks 13,750,000 

Expenses  of  printing  and  issuing  bonds 598,520 

277.844.Jiw 

Total 687.340,204 


The  complete  ten-year  plan  for  revenue  t<>  meet  the  Ion- 
going  items  of  expenditure  is  as  follows: 

rEN-YEAF    Rj  \  INI  B    PLAN,    1896    [905 

Yen 

Natural  increase  of  annual  revenue 147,698,97] 

Increased  taxes  and  adjustment  <>i  ia\  system 2  j<>.- 

Fund  to  pay  off  the  expenses  of  guards  at  Weihaiwei 

War  indemnity 40,093,  $87 

'*on'is  ■  •  133.048,889 

Profits  from  bonds  for  railway  and  telephone  enterpi  ises 1 1 ,680,4  '4 

Total 584.914.742 


()(>  ECONOMIC    EFFECTS   OF    THE    SINO-JAPANESE    WAR 

2  I  The  plans  for  post-bellum  enterprises  did  not  end  with 
those  mentioned  in  the  foregoing  paragraphs.  Both  the 
number  of  enterprises  and  the  amount  of  appropriation  asked 
for  were  increased.  In  the  enlarged  scheme  the  principal 
items  were  means  of  defense,  construction  of  railways  and 
establishment  of  an  iron  foundry.  The  change  in  the  plan 
relating  to  expenditure  necessitated  a  change  in  the  plan  for 
securing  revenue.  The  taxes  were  increased  again,  the  amount 
transferred  from  the  war  indemnity  was  also  increased  and  the 
bond  issue  enlarged,  thereby  maintaining  the  balance  between 
expenditure  and  revenue.  This  point  will  be  explained  in 
detail  later. 

There  is  one  more  point  to  be  noted  here,  and  that  is  re- 
garding the  revenue  from  the  indemnity  of  the  Sino-Japanese 
War.  The  total  amount  of  the  indemnity  and  other  special 
funds  was  368,248,691  yen.  The  war  indemnity  and  other 
revenues  were  handled  as  a  "Special  Account  Fund"  in 
accordance  with  our  accounting  regulations.  These  separate 
amounts  are  shown  as  follows : 

Yen  Yen 

Indemnity  for  war  expenses 311,072,865 

Indemnity  for  return  of  Liaotung  Peninsula 44,907,499 

Interest  on  indemnity  employed  profitably 8,888,224 

■ ■     364,868,588 

Fund  to  pay  back  expense  of  maintaining  guards  at 

Weihaiwei 3,380,103 

Total 368,248,691 

The  indemnity  as  analyzed  in  the  foregoing  paragraph  was 
an  adequate  source  of  revenue  for  conducting  post-bellum 
enterprises  and  replenishing  the  war  fund.  The  total  amount 
actually  transferred  for  the  support  of  post-bellum  enterprises 
was  278,690,217  yen.     The  details  are  as  follows: 

Yen 

Repayment  of  Sino-Japanese  War  expenses 78,957,165 

Transferred  to  fund  for  various  post-bellum  enterprises:        Yen 

Army  expansion 56,781 .709 

\,i\  \  expansion  . 139,157,096 

1  stablishment  of  iron  foundry 579,762 

Fund  for  special   war  expenses,   transportation, 

communication,  1897 3,214,485 

I99-733-053 

Total 278,690,217 


EFFECTS   OX    PUBLU     FINANCE  97 

The  foregoing  amounts  were  drawn  from  the  364,868,587  of 
indemnity.  The  fund  to  pay  back  the  expense  of  maintaining 
guards  at  Weihaiwei  was  from  the  beginning  transferred 
from  the  general  account.  Of  the  indemnity  received,  20 
million  yen  was  transferred  to  a  fund  for  the  use  of  the  Im- 
perial family,  50  million  yen  to  three  funds,  viz..  one  for 
replenishing  warships  and  torpedo  boats,  another  for  emer- 
gencies due  to  natural  disasters  and  the  third  for  educational 
purposes,  while  12  million  yen  was  transferred  to  the  General 
Account  in  1898. 

The  greater  part  of  the  indemnity  and  the  special  revenues 
was  used  for  the  war  and  for  various  other  expenses  connected 
with  the  war.  The  indemnity  has  had  a  considerable  effect 
upon  our  national  finance.     We  shall  discuss  it  in  detail  later. 

Expansion  of  means  of  defense 

The  government  recognized,  after  the  war  with  China,  that 
the  then  existing  army  and  navy  were  inadequate,  in  view  of 
the  condition  of  the  country  at  that  period,  and  formulated  a 
plan  of  expansion  which  was  put  into  execution  from  1895. 

For  the  first  period  of  expansion,  the  army  asked  for  an 
appropriation  of  43,320,000  yen  as  a  fund  for  a  continuation 
plan  to  extend  over  four  years,  from  1895  until  1899,  and  the 
navv  asked  for  (4. 770.000  yen  as  a  fund  for  a  similar  plan 
covering  the  seven  years  from  1895  until  1903.  The  general 
outline  of  these  plans  of  expansion  was  for  the  army  t< 
tablish  additional  divisions  and  to  construct  fortresses,  etc., 
and  for  the  navy  to  increase  it-  strength  by  means  of  new 
warships  and  torpedoes.  Up  to  that  period  our  military 
strength  was  seven  divisions  for  standing  service,  with  about 
50,000  men  in  time  of  peace  and  200,000  iu  time  of  war. 
According  to  the  new  plan  >ix  new  divisions  were  to  be  added. 
so  that  in  peace  the  number  of  men  would  be  150,000  and  in 
war  about  600.000.  And  the  navy  which  had  up  to  that 
period  50,000  tons  of  warships,  was  to  be  increased  to  200,000 
tons  or  more.  The  new  plans  of  expansion  were  severely 
criticised  by  the  people. 


98  ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE    WAR 

There  was  much  opposition  in  the  national  Diet.  But  the 
nation  generally  recognized  the  need  of  expansion  of  the  means 
of  defense,  and  the  plans  were  at  length  carried  out. 

But  in  the  first  period  of  expansion,  the  army  counted  only 
the  cost  of  erecting  fortresses,  building  barracks,  securing  the 
first  supply  of  arms  and  implements  for  use  in  camp  and  other 
immediately  necessary  expenses  for  the  standing  army. 
The  arrangements  necessary  for  war  preparedness  had  not  yet 
been  perfected.  The  navy  counted  only  the  cost  of  the 
number  of  warships  and  torpedoes  which  were  immediately 
needed,  and  in  order  to  perfect  the  original  plan  still  larger 
appropriations  had  to  be  asked  for.  Thorough  investigation 
was  therefore  made  as  to  the  unfinished  work  after  that,  and, 
as  a  result,  additional  appropriations  were  asked  for  in  the 
budget  for  1897. 

The  estimate  of  expenses  for  the  second  period  of  expan- 
sion was  38,350,000  yen  for  the  army  as  a  fund  for  the  contin- 
uation plan  from  1897  to  1903;  and  118,320,000  yen  for  the 
navy  for  a  similar  plan  from  1897  to  1905;  totaling  156,670,- 
000  yen  for  both  army  and  navy.  These  demands  of  the  army 
and  navy  were  secured  through  the  approval  of  the  Diet. 

In  1899  the  third  period  of  expansion  was  entered  upon  in 
accordance  with  the  plans  described  in  the  foregoing  para- 
graphs. The  establishment  of  the  seven  army  divisions  was 
perfected  and  fortresses  were  improved  or  newly  made  in 
the  islands  of  Formosa  and  Pescadores.  For  all  of  these 
18,040,000  yen  was  requested,  as  a  fund  for  a  continuation 
plan  extending  from  1899  to  1906. 

Besides  the  foregoing,  in  the  same  year,  the  appropriation 
for  army  expansion  had  to  be  increased  owing  to  the  rise  in 
prices,  so  that  an  additional  5,210,000  yen  was  appropriated  as 
a  fund  for  repairs,  for  securing  implements  and  for  the  mis- 
cellaneous expenses  of  the  construction  bureau,  while  the 
naval  expansion  fund  was  reduced  by  1,450,000  yen  after 
providing  for  construction  of  the  fortresses  already  decided 
upon,  owing  to  a  difference  in  the  exchange  rates  of  3,350,000 
yen. 


EFFECTS    OX    PUBLIC    FINANCE 


99 


Thus  the  plans  for  expansion  of  the  army  and  navy  were 
commenced  in  1896  and  after  going  through  the  first  and  the 
second  period  of  expansion  were  nearly  completed  when  in 
1899  the  plans  for  the  establishment  of  the  seventh  division, 
and  construction  of  the  fortresses  in  Tsushima,  Kielung  and 
Pescadores  Island,  were  carried  out,  so  that  great  financial 
problems  of  the  past  four  years  were  solved  for  the  time  being. 

Just  how  great  was  the  expenditure  for  defense  after  th< 
great  plans  for  expansion  had  been  laid,  is  shown  in  the  foll<  >\v- 
ing  tables: 

Expenditures  for  Defense,  1 893-1903 
A  r»i  v 


Fiscal  year 

Ordinary 

Extraordinary 

Total 

1893    

Yen 

12,419,829 
7,828,074 
8,410,212 
22,613,590 
28,746,263 
32,562,072 
35,577.3io 
36,123,892 

37,433.9" 

39,169,669 

39.355.388 

Yen 

2,301,397 
2,580,862 
1,605,723 

30,628,934 

31,401,725 

2i.335-58i 
16,973,888 
38,714,309 
20,947,869 
10,272,390 
7.529. '74 

Yen 
14,721,226 

1 894 

10,408,936 

10,01 5 

53,242.524 

60,147,988 

1895    

1896    

1897    

1898    

53.897.<  : 
52,551,] 

74,838,201 

1899    

1900   

1 901    

58,381,7 
49,442  ,<  ■ 

1 902 

iqoi 

46,884,562 

Total 

300,240,210 

184,291,852 

484,532,062 

Navy 


Fiscal  year 

( Ordinary 

Extraordinary 

Total 

1 893 

Yen 

5. 1 4 1. 475 
4,573.605 
4,913,244 
7.35L330 
9.54 

1  1.  km.  475 
I4.577.li4 
[6,91 1,000 

19.484.953 
21,063,345 

21,530,237 

Yen 

1,549 
8,607 

12,1  ;  . 

40,850,645 

47.338,427 

47,084,496 

41,363  I 
24.494,375 

14.587,620 

)  \  n 
8,100,921 

[894    

[895    

1 896 

10,253,154 
[3,520,269 



1898 

1899    

1900 

02 

61 ,66i  ,6io 
58,274,895 

1901 

1902 

43,979,3 
$26,188 

36,117,857 

1 903 

Total 

136,281 .667 

749 

397,164,416 

[00       ECONOMIC    Mil'   rS    OF    THE    SINO-JAPANESE   AVAR 


From  this  table  it  will  be  seen  that  after  1896  both  the 
ordinary  and  the  extraordinary  expenditures  suddenly  in- 
creased. The  amount  of  increase  required  by  the  plan  of 
expansion  of  the  means  of  defense  may  be  seen  from  the  follow- 
ing, abstracted  from  the  figures  in  the  foregoing  table:1 

Increased  Expenditures  for  Army  and  Navy,  Due  to  Plan  of  Expansion, 

1 896-1 903 


Army 

Navy 

Total  for 

Fiscal 
year 

Ordinary 

Extraor- 
dinary 

Total 

Extraor- 
dinary 

Army  and 
Navy 

1896. .  .  . 
1897- ... 

1898 

1899. ... 
1900. . . . 
1901 

1902. . . . 
1903 

Yen 

4,548,454 
4.981,063 
8,675,720 
12,423.570 
13.171,994 
i3,U5.759 
13,149,013 

I3,423.344 

Yen 

8,437,262 
21,914,002 
14.847,021 
14,055,883 
19,202,826 
11,669,525 

6,192,555 
4,628,109 

Yen 

12,985,716 
26,895,065 

23,522.741 
26,479,453 
32,374,820 
24,815,284 
19.341,568 
18,051,453 

Yen 

4.043,288 
32,487,404 
44,554,683 
45,369,046 
33,238,685 
21,147,756 
12,568,445 

9,552,430 

Yen 

17,029,004 
59.382,469 
68,077,424 
71,848,499 

65,613,505 
45,963,040 
31,910,013 
27,603,883 

Total  . 

83,518,917 

100,947,183 

184.466,100 

202,961,737 

387,427,837 

We  have  briefly  explained  the  tendency  to  an  increase  in 
both  ordinary  and  extraordinary  expenses  in  accordance  with 
the  plan  of  expansion  of  the  army  and  the  navy.  We  must 
now  proceed  to  explain  in  detail  the  extraordinary  expenditure 
which  is  the  main  thing  in  the  plan  of  expansion  of  the  means 
of  defense.  As  we  have  before  stated,  this  plan  was  carried 
out  gradually,  having  been  incorporated  in  the  budget  of  1896 
as  the  first  period,  in  1897  as  the  second,  and  in  1899  as  the 
third,  thereby  gradually  perfecting  the  work  of  national  de- 
fense as  a  part  of  the  post-bellum  program.  The  following  is  a 
table  of  the  amounts  required  by  this  expansion  plan: 

1  The  ordinary  expenditure  for  the  army  includes  the  expenses  of  the  seventh, 
eighth,  ninth,  tenth,  eleventh  and  twelfth  divisions,  the  expenses  of  the  guards  in 
Formosa  and  other  miscellaneous  expenses,  the  expenses  of  the  guards  in  Korea 
and  the  expenses  of  the  guards  at  \\  eihaiwei.  Of  these,  the  last  two  items  have 
no  relation  to  the  plan  of  expansion  of  defenses.  But  as  they  are  the  result  of  the 
war,  they  are  included  in  the  figures  here  given.  As  for  the  ordinary  expenditure 
for  the  navy,  as  it  is  difficult  to  single  out  the  expenses  due  to  the  plan  of  expansion, 
they  are  not  given  here  separately. 


EFFECTS    ON    PUBLIC    FINAN<  I. 


IOI 


Budget  of  Extraordinary  Expenses  Due  to  Expansion  Plan 


First 
period, 
1896  on 

Second 
period, 
1897  on 

Third 
period, 
1899  on 

Additional 
appropria- 
tion, 1899 

Total 

Army: 

Construction  of  fortresses. 
Repairs   and    initial   pur- 

Yen 

14,071.894 

17.334.891 

8,486,767 

2,949,108 
479.376 

Yen 
6,460,520 

19.363.747 
9.854.338 

3.542 
2,679,790 

Yen 

'  9.829,134 

8,220,583 

Yen 
5,208,478 

Yen 

27,010,197* 

7.699 
18,341.30s 

2,949,108 

118 
j. 790 

Expansion     of     plant    in 

Expenses  of   Army   Con- 
Deficit  

Total 

43.322,236 

38,362,137 

18,049,717 

5,208.478 

•I.2I7b 

Navy: 

Ship  construction 

Manufacture  of  arms 

Construction  expenses. .  .  . 

47. 154. 576 
33.75I.l63 
13.870,507 

78,893.399 
33,176,330 
6.25 

125,169,547° 

66,35 

-  5.497 

Total 

94,776,246 

118,324,719 

138,098,482 

156.686.855 

18,049,717 

5.208.478 

3l3.24l.333b 

»  The  difference  in  exchange  rate,  3.35I.35I  yen,  has  been  deducted. 
b  The  difference  in  exchange  rate  has  been  deducted. 
c  The  difference  in  exchange  rate,  572.421  yen,  has  been  deducted. 
d  The  difference  in  exchange  rate.  878,428  yen,  has  been  deducted. 


The  results  of  the  execution  of  the  foregoing  budget  may  be 
seen  in  the  following  tabic: 


Extraordinary  Expansion  Expi 
Army 


Repairs  and 

Fiscal  year 

Construction 

initial  pur- 

Manufacture 

of  fori ; 

chase  of 

of  arms 

Additional 

Total 

arms 

Yen 

Yen 

Yen 

Yen 

Yen 



1,291,730 

5.739,279 

934.o6i 

472,192 

17,262 

1897 

3,157,624 

[2,601 ,55s 

19,205 

5.515.1.15 

21  ,914,002 

1898 

2,970,  I'M 

7,4<>4.5PO 

2,492,243 

[,97  1 

tf,021 

1899 

3.465.359 

6,928,578 

3.541.755 

1 20, 1  9 2 

I4,< 

1900 

5,616,9]  2 

9.309.375 

4,216,945 

59  - 

[9,21 

1901 

4.433.293 

4.482,973 

2,706,436 

46  • 

[i,6 

1902 

1,591,202 

2,756,393 

I  .M  0,659 

44   I 

6,2< 

1903 

2,919,341 

[,697,81  1 

10,957 

4,62 

Total  . 

25,445,862 

(0,467 

[8,341,304 

6,249,551 

100,957,184 

102       ECONOMIC    EFFECTS    OF   THE    SINO-JAPANESE    WAR 

Navy 


Fiscal  year 

Construction 
of  ships 

Manufacture 
of  arms 

Construction 
of  buildings 

Total 

1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 

Yen 
3,099,482 

23,913-987 
30,298,987 
26,233,569 
17,565,610 

9,523,391 
5,964,095 
4,826,199 

Yen 

799,209 

7,218,321 

12,440,942 

16,859,198 

12,498,883 

7,382,769 

3.829,959 

2,592,492 

Yen 

144,596 
1,355,096 

1,814,753 
2,276,279. 

3,174.192 
4,241,596 
2,774,391 
2,134,739 

Yen 

4,043,287 
32,487,404 
44,554,682 
45,369.046 
33,238,685 
21,147,756 
12,568,445 

9.553,430 

Total. .  .  . 

121,425,320 

63,621,773 

17,915,642 

202,962735 

Li  crease  oj  administrative  expenses 
Not  only  did  the  administrative  expenses  of  various  kinds 
increase  on  account  of  the  plans  for  the  post-bellum  enter- 
prises after  the  Sino-Japanese  War  but  by  reason  of  the 
general  national  advancement,  which  added  to  the  increase  in 
administrative  expenses.  The  following  table  shows  the 
expense  of  the  public  debts,  the  expenditure  for  defense  and 
the  general  administrative  expenses  separately: 
Expenditures  on  Account  of  Public  Debts,  Defense,  and  Administration 


Fiscal  year 

Public  Debts 

Defenses 

General  Ad- 
ministration 

Total 

Yen 

Yen 

Yen 

Yen 

1893 

19,455,918 

22,905,993 

43,457,517 

85,819,428 

1894 

19,721,143 

20,764,267 

40,304,766 

80,790,176 

1895 

24,190,858 

23,671,985 

39.580,507 

87,443,350 

1896 

30,504,172 

73,416,902 

68,479,552 

172,400,626 

1897 

29,504,731 

110,666,757 

91,459,859 

231,631,347 

1898 

28,379,828 

112,634,626 

85,990,576 

227,005,030 

1899 

34,278,956 

114,307,693 

105,578,889 

254,165,538 

1900 

34.841.135 

I33.i73,58i 

124,735,343 

292,750,059 

1901 

38,085,910 

102,248,927 

126,521,988 

266,856,825 

1902 

76,075,690 

85,863,957 

127,287,083 

289,226,730 

1903 

36,484,520 

83,2 1  ^  02 6 

129,893.585 

249,596,131 

Total..  .  . 

371,522,861 

882,872,714 

983,289,665 

2,237,685,240 

The  following  table  shows  the  foregoing  different  items  of 
expense  in  their  respective  ratios,  and  how  large  was  the  ratio 
of  the  general  administrative  expense. 


EFFECTS    OX    PUBLIC    IT  NAN'   I  103 

Ratio  of  Public  Debt,  Defense  and  Administrative  Expenditures 


Fis  tl  year 


1893 
1894 
1895 
1896 

1897 
1898 
1899 
1900 
1901 
1902 
1903 


Public  debts 


2  2 

24 
27 

17 
u 

12 

13 

1  1 

14 

26 

14 


I  >efenses 


Per  cent 
26.7 
25- 

27 
42 
47 
49 
45 
45 
38 
29 
33 


(  .incral 
Administration 


7 

29 

1 

45 

6 

39 

8 

39 

6 

57 

0 

4i 

5 

42 

3 

47 

7 

44 

3 

52 

Per  d  at 
50.6 
9 
3 
7 
5 
9 
5 
6 

4 
o 
o 


It  will  be  seen  from  Table  IV  at  the  end  of  this  chapter1  that 
the  various  national  expenses  have  increased  enormously 
since  1896.  We  must  here  briefly  survey  the  various  post- 
bellum  enterprises  which  were  the  cause  of  the  increase  in  the 
general  administrative  expenses.  Of  these,  the  following 
may  be  especially  mentioned:  (1)  establishment  of  an  iron 
foundry  and  extension  of  the  same;  (2)  construction  and 
improvement  of  railways;  (3)  extension  of  telephone  ex- 
changes; (4)  subsidies  to  various  special  banks;  (5)  subsidies 
for  the  encouragement  of  navigation;  (6)  sundry  expenses  in- 
curred for  Formosa,  etc.  These  will  be  explained  in  the  order 
above  enumerated. 

ESTABLISHMENT    AND    EXTENSION    <>I     [RON     FOUNDRY 

The  establishment  of  an  iron  foundry  was  the  most  impor- 
tant of  the  post-bellum  enterprises,  because  the  demand  for 
iron  manufactures  increased  enormously  every  year.  Then  in 
connection  with  the  plan  to  extend  the  mean-  for  national  de- 
fense it  was  plain  that,  as  iron  was  the  principal  material  used 
in  building  warships  and  manufacturing  arms,  in  case  oi 
emergency  the  supplies  must  be  obtainable  at  home.  Thus 
the  iron  foundry  came  to  be  established.  As  to  the  expense  of 
its  establishment,  4,095,793  yen  were  asked  for  in  the  national 
budget  in   1896,  and   later,  in    [898,  6,474,056  yen  more  were 

1  Post,  p.  144. 


K>4        ECONOMIC    EFFECTS   OF   THE    SIXO-JAPANESE    WAR 

added,  so  that  the  entire  expense  amounted  to  10,569,849 
yen. 

The  work  of  establishing  the  iron  foundry  gradually  pro- 
gressed, and  in  1899  experiments  in  manufacturing  from  iron 
were  being  made,  so  that  there  was  urgent  need  of  securing  a 
fixed  sum  as  operating  capital  in  order  to  commence  work. 
The  enterprise  of  the  iron  foundry  is  a  great  industry  with 
far-reaching  effects.  The  necessary  supplies  of  ore,  coal, 
cement  and  other  materials  can  not  be  secured  in  sufficient 
amount  from  a  few  private  mining  concerns.  Then,  again, 
considered  from  the  economic  point  of  view,  as  it  is  more 
advantageous  for  an  iron  foundry  to  own  its  own  mines,  it 
appeared  necessary  to  secure  a  fund  for  purchasing  mines 
from  which  to  obtain  raw  material.  To  hasten  the  work  of 
constructing  the  harbor  at  Wakamatsu  to  secure  transporta- 
tion conveniences,  suitable  subsidies  must  be  given  to  the 
Wakamatsu  Harbor  Construction  Company.  In  order  to 
secure  perfect  results  from  the  work  of  the  iron  foundry,  the 
appropriation  for  expenses  must  be  reasonably  increased. 
So,  in  1899,  8,632,845  yen1  were  added,  the  total  amount 
finally  reaching  19,202,694  yen. 

To  meet  this  expense,  579,762  yen  were  raised  from  in- 
demnity and  18,622,932  yen  from  bonds.  The  result  of  the 
plan  is  seen  in  the  following  table: 


Fiscal  year 


1896 

1897 

1898 

1899 

1900 

1 901 

1 902 

1903 

Total. 


Establishment 
of  iron  foundry 


Yen 

157,529 
709,224 

L747.572 
3,011,008 
7,126,198 
5.853.335 
490,117 
820,011 


19.914.994 


Supplementary 
appropriation 


Yen 


322 

495 

20 


762 

429 

454 


838,645 


Investigation 


Yen 


17.942 


17.942 


Total 


Yen 

157,529 
709,224 

L747.572 
3,011,008 
7,126,198 
6,176,097 
1.003,488 
840,465 


20,771.581 


^00,000  yen  wore  for  harbor  construction  at  Wakamatsu,  and  4,000,000  yen  a 
reserve  to  be  used  as  operating  capital. 


EFFECTS   ON    PUBLIC   FINAN<  1  IO5 

CONSTRUCTION'    AND    [MPROVEMENT    OF    RAILWAYS1 

The  new  railway  system  was  inaugurated  by  the  Railway 
Construction  Act  promulgated  June  20,  1892.  The  continua- 
tion plan  adopted  was  to  include  a  period  of  sixteen  years, 
beginning  with  1893.  At  the  time  of  the  Sino-Japanese  War 
the  total  amount  of  the  expense  of  railway  construction  it- 
required  by  this  continuation  plan  reached  59,921,663  yen. 
Thus  the  work  of  railway  construction  steadily  progressed 
and  the  railway  lines  were  extended.  But,  at  the  same  time, 
the  business  of  transportation  increased  year  by  year,  and  the 
demand  for  service  on  the  already  constructed  lines  increased 
more  and  more,  so  that  the  existing  lines  and  the  number  of 
cars  in  use  were  not  sufficient  to  meet  the  demand.  Moreover, 
under  abnormal  conditions,  service  had  to  be  refused  to  the 
general  public,  as  for  instance,  in  time  of  war.  So  the  govern- 
ment, as  the  first  step  in  advance,  changed  the  whole  ot  the 
Tokaido  Government  Railway  from  a  single  to  a  double- 
track  line.  Necessary  improvements  were  added  to  the 
stations  on  this,  and  also  on  the  Shin-Yetsu  line,  the  number 
of  cars  was  increased,  and  it  was  generally  planned  to  give 
entire  satisfaction  to  both  passengers  and  shippers  in  the  way 
of  transportation  facilities.  This  scheme  was  established  as  a 
continuation  plan  to  be  worked  between  1896  and  1 
beginning  in  1896.  The  entire  expense  for  improvement  was 
estimated  at  26,553,000  yen. 

The  work  of  railway  construction  steadily  progressed  in 
accordance  with  the  plan  outlined  in  the  foregoing  paragraph. 
In  [897  there  was  need  of  an  increase  in  the  fund  tor  c<>n- 
struction  expenses  between  Tsuruga  and  Toyama.and  between 
llachioji  and  Nagoya.  Thus,  in  that  year  8,103,381  yen  were 
added,  and  in  1899  the  fund  tor  construction  expenses  between 
Tsuruga  and  Toyama  and  between  Sinonoi  and  Shiojiri  was 
increased  by  5,133,28]  yen,  bringing  the  total  amount  up  to 
73. 1 58,325  yen.  Then,  in  [900,  [9,529,886  yen  were  added  in 
connection  with  the  construction  ot"  the  line  between  Fuku- 

1  See  Table  Y  at  the  end  of  this  chapter,  post,  p.  1  +5. 


106       ECONOMIC   EFFECTS    OF   THE    SINO-JAPANESE   WAR 

shima  and  Aomori,  and  also  2,156,248  yen  as  construction 
expense  for  the  line  between  Kaidaichi  and  Kure,so  that  at  the 
end  of  1900  the  cost  of  constructing  railways  during  the  first 
period  had  reached  94,844,459  yen,  and  the  additions  made  to 
the  first  estimates  for  construction  after  the  war  amounted  to 
61,475.796  yen. 

Besides  the  foregoing,  in  1897  a  plan  for  railway  construc- 
tion in  Hokkaido  was  formulated,  involving  an  expenditure  of 
18,562,050  yen  and  another  in  1900  for  Formosa  with  an  ex- 
penditure of  28,800,000  yen.  We  shall  explain  this  plan  later. 
The  totals  in  Table  V  at  the  end  of  this  chapter1  show  the 
actual  results  of  this  improvement  and  construction  work  all 
over  the  country.  The  funds  for  these  railway  undertakings 
were  mostly  secured  by  the  issue  of  bonds.  To  be  more 
specific,  as  shown  in  the  table,  about  77  per  cent  of  the  fund 
was  obtained  from  bond  issues  and  the  rest  was  from  the 
ordinary  annual  revenue. 

EXTENSION    OF    TELEPHONE    EXCHANGES 

Since  the  telephone  exchange  service  was  commenced 
between  Tokyo  and  Yokohama  in  1890,  and  between  Osaka 
and  Kobe  in  1892,  the  applications  for  telephone  installation 
have  increased  year  by  year,  so  that  even  the  present  develop- 
ment of  the  system  is  not  equal  to  the  demand.  As  there 
were  many  other  cities  besides  the  four  mentioned  above 
which  demanded  service,  after  the  war  the  government 
planned  to  establish  a  telephone  system  in  Kyoto  and  the 
thirty-five  other  cities  which  needed  it  most  urgently;  then 
the  single-line  system  already  established  was  changed  to  a 
double-line  system.  Other  extensions  were  planned.  In 
1896  the  so-called  continuation  plan  was  instituted  to  be 
carried  out  between  1896  and  1902  with  the  sum  of  12,802,- 
107  yen  appropriated  for  the  entire  cost  of  the  extension. 
Furthermore,  in  order  to  increase  the  telegraphic  lines  the 
government  executed  a  continuation  plan  between  1897  and 
1898  with  a  budgetary  estimate  of  705,338.90  yen. 

lPost,  p.  145. 


EFFECTS    OX    PUBLIC    FINANCE 


107 


The  following  tabic  shows  the  annual  disbursement  for 
telephone  exchange  extension,  the  actual  result  of  the  ex- 
tension, and  the  sources  from  which  the  fund  was  derived: 

Disbursements  and  Revenue  for  Teli  phone  Exi  hange  Extension 


Fiscal  year 

Cost 

Sources  of  ordi- 
nary annual 
revenue 

Bonds  issued 

Total  revenue 

1896 

1897 

1898 

1899 

1 900 

1 901 

1902 

1903 

594,196 
2,473.420 

1,896,1 19 

1,781,655 
2,349,786 
1,807,587 
I.  ''1 5.532 
268,556 

Yen 

437.  <s75 
72,790 

Yen 

594,196 
2,473,420 

1 ,89(1,1 19 
1,781,655 
2.34" 
1,807,587 
1,177.657 
195.766 

Yen 

594.196 
N.420 
1 ,896,1 19 
[,781 

2,349 

1,807 
1,615,532 
268,556 

Total .... 

t2.786.851 

510,665 

12,276,186 

12,786,851 

SUBSIDIES    TO    VARIOUS    SPECIAL     BANKS 

Another  method  adopted  to  improve  financial  facilities 
after  the  Sino-Japanese  War  was  the  granting  of  subsidies  to 
various  banks,  as  tabulated  below. 


Fiscal 
year 

Hypothec 
Bank 

Agricultural 
and  Indus- 
trial Bank 

I  [okkaido 

( lolonial 

Bank 

Formosa 

Colonial 
Bank 

Industrial 
Bank  of 
Japan 

Total 

1897... 
1898..  . 
1 899. .  . 
1900. .  . 
1901. .  . 
1902. .  . 
1903-  • 

Yen 

55,052 
30,010 
30,873 

Yen 
991,625 

1,983.355 

1,990,008 

1,996,010 

940,224 

213,901 

5,000 

Yen 

250,000 
250,000 

200,000 
200,000 

Yen 
250,000 
.  ^0,000 

6 

Yen 
+.541 

1.046,677 
2,013,365 

2.520,881 
jfi.OIO 

[,140,22  \ 

728,442 

5.000 

Total 

"5,935 

8,120,123 

1111(1,000 

5<  10,000 

64,54' 

9,700,599 

EN(  nt  K  \«,|  \tl\i     OF    NAVIGA1  ION 

Special  encouragement  to  navigation  was  early  planned  in 
accordance  with  the  proclamation  issued  in  September,  1886. 
The  government  thereupon  subsidized  the  Nippon  Yusen 
Kaisha  to  the  extent  of  880,000  yen  annually,  thus  enabling 


108        ECONOMIC   EFFECTS    OF   THE    SINO-JAPANESE   WAR 

that  company  to  institute  regular  sendee  between  Yokohama 
.iihI  Shanghai,  Kobe  and  Tientsin,  Kobe  and  Neuchang,  Kobe 
and  Vladivostok,  between  various  other  points  in  Japan 
proper  and  Hokkaido  and  various  points  along  the  line. 
But  the  period  of  effectiveness  of  the  proclamation  expired 
in  September,  1900,  and  it  then  became  necessary  to  estab- 
lish a  policy  to  govern  the  regular  service  in  the  future. 
Previous  to  that,  in  1896,  with  the  object  of  encouraging 
navigation,  the  government  had  promulgated  a  law  according 
to  which  subsidiary  grants  would  be  made  to  ships  which 
should  subscribe  to  certain  requirements.  The  highest 
amount  designated  for  this  purpose  was  one  million  yen 
annually,  but  the  actual  result  of  the  operation  of  this  law 
was  such  an  increase  in  ships  that  in  1897  no  less  sum  than 
1,700,000  yen  was  required  for  this  purpose,  while  in  1898  the 
amount  needed  for  subsidies  and  extension  of  steamship 
routes  ran  above  five  million  yen.  Now  after  the  term  of 
subsidy  to  the  Nippon  Yusen  Kaisha  had  expired,  it  was 
found  that  if  the  general  law  were  to  be  applied  to  the  com- 
pany in  the  future  as  it  had  been  in  the  past  the  expense 
would  be  increased  enormously.  So  discussion  centered 
about  the  point  whether  the  general  regulations  should  be 
applied  to  the  leading  regular  service  routes,  or  new  special 
regulations  should  be  established.  The  government  decided 
upon  the  latter  course,  and  introduced  into  the  Diet  a  bill 
which  was  later  approved  empowering  the  government  to  sign 
a  contract  for  an  annual  subsidy  of  580,000  yen  for  five  years, 
from  October,  1900,  to  September,  1905,  for  the  chief  regular 
connecting  lines  of  communication  between  Japan  and  Russia, 
and  China  and  Korea  (the  Yokohama-Shanghai,  the  Kobe- 
Korea,  the  Kobe-North  China,  Kobe-Korea-North  China,  and 
the  Kobe-Vladivostok  routes)  and  between  Japan  proper  and 
Hokkaido  (the  Kobe-Otaru  and  the  Aomori-Muroran  routes). 
In  addition,  the  government  decided  to  subsidize  the  regular 
service  along  the  coasts  of  Hokkaido  (between  Hakodate  and 
Nemuro,  between  Otaru  and  Wakanai,  between  Nemuro  and 
Abashiri,  and  between  Nemuro  and  Etorofu)  from  October, 


EFFECTS    OX    PUBLIC   FINANCE 


109 


1900,  to  September,  1905.  To  the  Yangtze-Kiang,  the  Shang- 
hai-Soochow,  and  the  Shanghai-Hankow  steamship  lines,  a 
certain  amount  of  subsidy  was  to  be  given  every  year  to 
enable  them  to  maintain  regular  sen  ice.  At  the  same  time, 
with  a  view  to  restricting  the  expenditure  of  the  fund,  the 
government  decided  to  subsidize  only  the  regular  service  of 
three  steamship  lines,  European,  Seattle,  and  San  Francisco, 
for  ten  years,  i.e.,  from  1900  to  1909,  to  the  extent  of  2,673,894 
yen  for  the  European,  654,030  yen  for  the  Seattle,  and  1,013,- 
880  yen  for  the  San  Francisco  service.  The  government  then 
revised  the  regulations  so  that  after  January,  1899,  the 
amount  of  subsidy  granted  to  ships  constructed  in  foreign 
countries  would  be  cut  in  half  and  the  period  of  assistance  lim- 
ited to  18  years,  from  October  I,  1896. 

In  addition,  the  government  promulgated  regulations  for 
the  encouragement  of  shipbuilding,  by  which  ships  built 
according  to  a  prescribed  set  of  regulations  might  receive 
grants,  as  an  aid  to  the  development  of  navigation. 

The  several  budgets  required  to  carry  out  the  foregoing 
plans  are  shown  in  the  following  table: 

Ship  Subsidies 


Fiscal  year 

Extension  of 
steamer  routes 

Encouragement 
of  navigation 

Encouragement 

of  shipbuilding 

Total 

1896 

1897 

1898 

1899 

1 900 

1901 

1902 

1903 

\  t  n 

[34.775 

538,702 

67 1, 3  2 1 

896,898 

4,205,729 

5.554.440 

6,387,713 

6.332,44« 

880,000 

708,384 

2,580,802 

3,957,31s 

I.  INS.  71.  J 
906,203 
676,300 
802,431 

Yen 

13."") 
213,875 
[87,380 
[52,930 

581,094 
4H,348 

437.'s«<» 

Yen 

[,01  1.775 

1 ,260,195 

3,46s 

5,041,593 

5.547,421 

7.041.737 

7.475.361 

7.572,689 

Total..  .  . 

24,722,026 

1  1  ,700,197 

1,997,546 

38,419.7 

SUNDRY    EXPENDITURES    l\    CONNECTION     Willi     FORMOSA1 

Formosa  came  into  our  possession  as  a  result  of  the  Treaty 
of  Shimonoseki.     The  various  expenses  incurred  in  connect  ion 

'Especially  those  in  connection  with  special  undertakings  in   Formosa  and  in 
Weihaiwei. 


HO        ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 

with  the  island  increased  considerably  the  annual  expend- 
iture. 

The  expenditure  in  connection  with  Weihaiwei  was  that 
made  necessary  by  its  military  occupation  to  guarantee  the 
fulfilment  of  the  Treaty  of  Shimonoseki.  It  was  the  sum  in 
excess  of  the  amount  paid  by  the  Chinese  Government  for  the 
guards'  service  there.  Article  VIII  of  said  treaty  recognized 
the  right  of  our  army  to  occupy  Weihaiwei  as  such  guarantee. 
And  in  Article  I  of  the  supplementary  treaty,  China  agreed  to 
pay  400,000  taels  as  one-fourth  of  the  expense  of  a  temporary 
occupation  of  Weihaiwei  by  the  Japanese  Army.  But  as 
the  terms  of  the  treaty  were  perfectly  fulfilled,  and  especially 
as  the  payment  of  the  indemnity  was  completed  May  7,  1898, 
this  item  of  expense  in  connection  with  Weihaiwei  became 
unnecessary.  After  that  date,  of  the  items  of  expense  men- 
tioned above,  those  for  Formosa,  according  to  the  budget  for 
1896,  were  18,489,811  yen  in  all,  and  these  are  explained  in 
detail  below.  The  same  amount  has  been  appropriated  each 
year  ever  since. 

Yen 

Civil  administrative  expense 5,928,705 

Defense  expense 7,710,481 

Extraordinary  Formosan  expense 4,850,625 

But  after  1897  the  annual  receipts  and  disbursements  in 
Formosa  were  turned  over  to  a  special  account,  with  a  view  to 
making  Formosa  self-supporting.  A  reform  of  the  govern- 
ment of  Formosa  was  planned.  The  number  of  officials  there 
was  reduced,  some  of  the  government  offices  were  abolished 
and  some  amalgamated,  the  ordinary  administrative  expenses 
were  economized,  and  at  the  same  time,  an  increase  in  revenue 
from  Formosa  was  definitely  anticipated.  Further,  new 
local  taxes  were  collected,  thereby  considerably  assisting  the 
finances  of  Formosa.  Consequently,  the  relief  fund  in  the 
Treasury  for  administrative  expenses,  which  had  amounted  to 
six  million  yen,  as  we  mentioned  before,  was  reduced  to  three 
million  yen  in  1899.  It  was  gradually  reduced  after  that  until 
in  1 910  it  ceased  to  exist.  While  therefore  the  ordinary 
administrative  expenses  of  Formosa  were  economized  so  that 


EFFECTS    OX    PUBLIC    FIXAXCE  III 

Formosa  was  being  led  on  to  self-support,  at  the  same  time 
necessary  enterprises  in  the  new  possessions  could  not  he 
neglected.  So  the  government  decided  to  carry  out  a  con- 
tinuation plan  extending  over  seven  years  with  a  total  ap- 
propriation of  35  million  yen  for  financing  various  enterprises, 
such  as  (i)  construction  of  railways,  (2)  investigation  of  land, 
(3)  construction  of  harbors,  and  (4)  building  new  offices  for 
the  government  general.  These  will  now  be  explained 
further. 

(1)  A  north-and-south  railway  in  Formosa  was  considered 
a  necessity  from  the  point  of  view  of  military  and  industrial 
development.  The  government  at  first  granted  a  permit  to  a 
private  concern.  But  as  the  work  was  not  begun  at  once,  and 
there  was  no  prospect  that  the  railway  would  ever  be  built  in 
this  way,  it  was  necessary  for  the  government  to  build  the  line 
itself. 

(2)  The  land  in  Formosa  had  never  up  to  this  time  been 
surveyed  carefully,  and  land  registry  was  in  a  complicated 
condition.  Ik-sides,  as  there  were  the  two  systems  existing  of 
large  and  small  leases  and  other  peculiar  conditions  attached 
to  the  land,  it  was  a  very  difficult  task  to  establish  a  good  lan<  1 
system.  Indeed  such  readjustment  was  impossible  without  a 
careful  survey. 

(3)  The  harbors  and  bays  of  Formosa,  with  one  or  two  ex- 
ceptions, could  hardly  be  recognized  as  such,  and  even  in  the 
case  of  the  exceptions,  extensive  work  was  needed  to  make 
them  safe  places  for  ships  to  anchor.  Now  after  Formosa 
came  into  Japan's  possession  the  number  of  ships  coming  and 
going  between  Japan  proper  and  Formosa  steadily  increased. 
Not  only  so,  but  the  Formosan  trade  gradually  developed, 
that  it  became  a  matter  of  urgenl  necessity  to  reconstruct  tin- 
harbors  and  bays  of  the  island  in  order  to  make  them  a  safe 
anchorage  for  ships.  The  water  works  and  government 
buildings  also  were  of  direct  and  indirect  necessity  in  develop- 
ing Formosa.  The  following  table  gives  the  amounts  needed 
for  these  various  undertakings: 


112        ECONOMIC    EFFECTS   OF   THE   SINO-JAPANESE    WAR 

Yen 
I  ormosan  railway  construction  and  improvements  .  .  .     28,800,000 

Kielung  harbor  improvement 2,000,000 

Temporary  land  survey  in  Formosa 3,000,000 

New  buildings  for  the  Government  General 1,200,000 

Total 35,000,000 

Table  VI  at  the  end  of  this  chapter1  shows  the  actual  ex- 
penditure made  by  the  Treasury  for  Formosa  for  the  chief 
items. 

The  actual  account  for  the  guards  at  Weihaiwei  was  917,- 
677  yen  in  1896;  855,588  yen  in  1897,  and  85,576  yen  in  1888. 

Besides  the  foregoing,  the  chief  undertakings  planned  after 
the  Sino- Japanese  War  were  improvement  of  water  courses, 
extension  of  educational  plants,  development  of  Hokkaido, 
subsidy  for  harbor  construction,  establishment  of  agricultural 
experiment  stations  and  schools  for  sericulture,  development  of 
foreign  trade,  erection  of  a  hall  for  exhibiting  goods  for  foreign 
trade  (after  1896),  special  forestry  administration  (after  1899), 
improvement  of  live  stock,  investigation  of  sulphur  mines, 
establishment  of  industrial  experiment  station  (after  1900), 
also  increasing  legations  abroad  and  extending  the  customs 
service. 

As  the  government  thus  launched  out  ambitiously  in  various 
directions,  the  budget  expanded  enormously  after  the  war. 
The  total  amount  of  the  ordinary  and  extraordinary  annual 
expenditure  in  1900  amounted  to  nearly  300  million  yew.  Later, 
when  the  extension  of  defenses  and  the  other  continuation 
plan  had  been  nearly  completed,  the  annual  expenditure  for 
these  purposes  was  stopped  and  the  extraordinary  expenditure 
was  reduced.  Yet  before  the  Russo-Japanese  War,  that  is,  in 
1903,  the  amount  did  not  fall  below  249  million  yen.  A  part 
of  this  increased  expenditure  was  obtained  from  the  indemnity 
and  a  part  from  the  bond  issue,  but  the  balance  had  to  be 
taken  from  the  ordinary  revenues  of  the  government.  On 
that  account  an  increase  in  taxes  was  several  times  required. 
We  shall  now  disclose  in  the  following  chapters  the  sources  of 
revenue  for  the  foregoing  various  items  of  expenditure. 

1  Post,  p.  146. 


EFFECTS    OX    PUBLIC    I  I\  \\<  1 


II 


Bonds  and  indemnity 

BON1N 

(i)  War  Bonds — The  bonds  issued  to  pay  off  the  expei 
of  the  Sino-Japanese  War  were  the  so-called  war  bonds.  The 
total  amount  of  the  issue  was  124,920,750  yen,  with  net 
receipts  to  the  government  of  122,457,687  yen.  The 
period  of  issue  of  these  bonds  stretched  from  September,  1894, 
to  November,  1896.  The  receipts  from  the  bond  issue  were 
used  entirely  for  war  expenses.  As  this  has  been  already 
explained  we  shall  not  repeat  the  details  here.  But  below  we 
shall  show  the  burden  imposed  upon  the  Treasury  in  conse- 
quence of  the  bond  issue. 

Details  of  Bond  Issle  * 


Fiscal  year 

Redemption  of  principal 

Interest  paid 

Total 

Face  value 

Amount  paid 

1894 

1895 

1896 

1897 

1898 

1899 

1 900 

Yen 

^,300 
940,300 

2,235,200 

4,889,300 

[08,516,650 

Yen 

8,001,558 
912,255 

2,151,128 

4,986,746 

108,739,883 

Yen 

7s-223 

2,937,055 
5,431.824 

6,082,643 

6,206,077 

6,094,789 
5,819,049 
5,825,219 
5,785,426 

5,779,344 
5. 774. 7'") 
5,792,879 
5,701,388 
5,779,263 
5,674,934 
5.677.813 
2,721,485 

Yen 
223 
2,937,055 

5.431 

2,643 
6,206,077 
[4,096,347 
5,8i 

5,219 
6,697,681 
5.779.344 
5.774.769 
5.792 
5.701 

1,263 
7,826 

[0,664,559 
1 1 1,461, 

1901 

1902 

1903 

1 904 

1905 

1906 

1907 

1908 

1 909 

1910 

Total 

[24,920,750 

124,791,570 

87,162,1  Bo 

211,953,75' 

»  A  word  should  be  said  regarding  the  amount  paid  for  redemption  of  t  he  principal  The  amount 
paid  was  only  78,452,300  yen  or  the  amount  of  the  fai  e  value  of  the  bonds  redui  ed,  by  purchase  and 
exchange,  by  46, 339, 271  yen.    Thus  the  amount  paid  for  redemption  and  the  fa<  e  value  of  the  bonds 

did  not  coincide. 


The  net  receipts  were,  as  before  stated,   [22,437,687  yen, 
so  that  after  all  the  amount  paid  in  for  redemption  exceeded 

9 


114       ECONOMIC   EFFECTS   01     THE    SINO-JAPANESE   WAR 

the  net  receipts  by  2,353,884  yen.  The  net  burden  to  the 
Treasury'  in  consequence  of  the  war  bonds  issued  was  therefore 
this  last  figure,  to  which  should  be  added  89,516,064  yen 
for  the  interest  payments,  and,  in  addition,  about  500,000  yen 
for  the  cost  of  printing  and  preparing  the  bonds  and  also  the 
expense  connected  with  making  the  redemption  and  interest 
payments. 

(2)  Sundry  bond  issues  in  connection  with  the  post-bellum 
enterprises.  When  the  government  was  casting  about  for 
funds  to  finance  the  post-bellum  enterprises,  it  decided  to 
secure  such  by  the  issue  of  bonds  for  productive  enterprises, 
as  the  building  of  railways  and  extension  and  improvement 
of  telephone  facilities.  In  consequence,  as  we  have  seen,  an 
enormous  number  of  bonds  appeared,  such  as  the  industrial 
bonds,  the  railway  bonds,  the  Hokkaido  railway  bonds  and  the 
Formosan  industrial  bonds,  which  were  decided  upon  in  1892. 

The  industrial  bonds  were  issued  in  accordance  with  the  in- 
dustrial bonds  act,  Law  No.  59,  promulgated  March  29,  1896, 
in  order  to  secure  a  fund  for  various  post-bellum  enterprises. 

The  amount  was  at  first  fixed  at  135  million  yen  and  later 
increased  to  148,991,834  yen.  This  amount  was  apportioned 
to  various  enterprises,  as  follows : 


Nature  of  enterprises 


Amount 


Remarks 


Expense  of  improving  government 
railways  already  built 

Expense  of  building  Hokkaido  rail- 
ways (Sorachita  to  Asahigawa) 

Expense  of  establishing  an  iron  foun- 
dry 


Expense  of   extending   telephone   ex- 
changes  

Establishment  of  transaction  office  of 

leaf  tobacco  and  its  operating  capital 

Expenses  of  army  and  navy  extension 

Army 18,459,484 

Navy 58,999,423 

Interest  on  bonds  for  the  first  year.  .  .  . 


Yen 

26,553,000 

1,178,330 
3,516,031 

12,802,102 

12,213,550 
77.458,907 

1,278,080 


Afterward  increased  one 
yen,  i.e.,  1,178,331. 
Afterward  changed  to 
18,622,932  yen,  i.e.,  an 
increase  of  15,106,901 
yen. 

Afterward    increased    5 
yen,  i.e.,  12,802,107  yen- 


Afterward  163,007  yen, 
i.e.,  a  decrease  of  1,115,- 
073  yen- 


EFFECTS    OX    PUBLIC    FINANCE  115 

Law  No.  93,  promulgated  May  13,  1896,  for  the  building  of 
the  Hokkaido  railways,  provided  for  the  construction  of  the 
line  from  Asahigawa,  Ishikari  province,  through  Tokachida  in 
Tokachi  province,  and  Atsukishi  in  Kushiro  province,  to 
Abashiro  in  Kitami  province;  a  line  from  Ribetsu  in  Tokachi 
province,  through  Ainouchi  in  Kitami  province  and  Atsukishi 
in  Kushiro  province,  to  Xemuro  in  Nemuro  province;  a  line 
from  Asahigawa  to  Soya;  a  line  from  Uryu  plain  in  Ishikari 
province  to  Masuge  in  Teshiwo  province;  a  line  from  Xayoro 
in  Teshiwo  province  to  Abashiri,  and  a  line  from  Otaru  to 
Hakodate;  for  all  of  which  it  was  decided  to  issue  bonds  to  the 
amount  of  33  million  yen. 

Next,  the  object  of  Law  Xo.  4,  for  railway  construction, 
issued  June  20,  1892,  was  to  build  to  the  limit  of  expenditure 
of  60  million  yen  the  Central,  the  Hokuriku,  the  Kokuyetus, 
the  Oou,  the  Sobu,  the  Joban,  the  Kinki,  the  Sanyo,  the 
Sanin,  the  Shikoku,  the  Kyushu  and  other  lines.  Laws,  Xos. 
1 1  and  12,  issued  in  March,  1895,  revised  LawXo.  4,  and  added 
more  lines.  As  a  result,  the  total  amount  of  the  appropriation 
was  changed  to  94,844,459  yen. 

The  industrial  bonds,  the  Hokkaido  railway  bonds,  and  the 
railway  bonds  were  turned  over  to  special  accounts  by  Law 
Xo.  13,  issued  in  February,  1899,  providing  for  special  ac- 
counts for  these  three  loans.  Afterwards  these  bonds  wen 
called  the  Imperial  five  per  cent  bonds. 

The  government  now  attempted  to  obtain  a  fund  for 
Formosan  development  expenses  by  issuing  bonds.  Law  No. 
75,  of  March  20,  1899,  provided  for  the  issue  of  Formosan 
industrial  bonds  to  the  amount  of  3,500,000  yen  for  the  pur- 
pose of  building  railways,  surveying  land,  constructing  forts, 
and  erecting  government  buildings.  The  foregoing  four  cla 
of  bonds  may  be  summarized  a-  shown  in  the  following  table. 

By  these  immense  bond  issues,  the  government  tried  to 
carry  out  the  aforesaid  plans  lor  new  enterprises  within  the 
allotted  time.  But  at  that  time  the  money  market  all  over  the 
country  was  very  much  depressed,  and  in  consequence  it  was 
impossible  to  float  these  bonds.      Therefore  the  money  had  to 


IK)        ECONOMK      llll<   IS    OF    Till.    SINO-JAPANESE   WAR 


-  of  bonds 

First  authorization 

Subsequent  substitute 
authorization 

Yen 

135,000,000 

33,000,000 

60,000,000 

35,000,000 

Yen 

148,991,834 

33,000,000 

1 1< ik kaido  Railway 

94,844,459 

Formosan  industrial 

35,000,000 

Total  

263,000,000 

311,836,293 

be  transferred  either  from  the  Savings  Deposits  Account  of  the 
Finance  Department,  or  from  the.  Indemnity  Account.  But 
in  June,  1899,  10  million  pounds  sterling  of  four  per  cent  bonds 
in  British  gold  were  issued  (issue  price,  90  per  cent  commission, 
4  per  cent  net  receipts,  86  per  cent);  and  later  the  money 
collected  in  the  Deposit  Section,  or  bond  redemption  fund, 
was  utilized  in  order  to  prosecute  the  work  intended  to  be 
financed  by  the  bond  issues. 

Relation  of  bond  issues  to  the  expense  of  said  enterprises. — 
We  shall  next  consider  the  details  of  the  amount  needed  for 
enterprises,  to  be  prosecuted  by  means  of  the  money  collected 
by  the  issue  of  industrial,  railway,  and  Hokkaido  railway 
bonds,  in  order  to  show  the  relation  of  the  money  collected 
from  bond  issues  to  the  total  expenditure  for  these  enter- 
prises. At  the  end  of  this  chapter  are  several  tables  showing 
these  details.  Table  VII1  gives  the  revenue  covering  the 
expenditures  for  Formosan  development  for  the  years  1896- 
1903  and  includes  money  transferred  from  the  general  account, 
money  transferred  from  indemnity,  and  money  received  from 
bond  issues;  Table  VIII2  gives  the  manifold  purposes  of  the 
industrial  bonds  for  the  same  period,  and  Table  IX3  gives  the 
ratio  of  actual  expenditures  for  Formosan  development,  also 
during  the  same  period. 

The  following  table  will  show  the  amounts  of  interest  paid 
on  these  various  bond  issues:4 

1  Post,  p.  147.  2  Post,  p.  148.  3  Post,  p.  149. 

*  The  Imperial  5  per  cent  bonds  refer  to  the  railway,  the  industrial  and  the  Hok- 
kaido railway  bonds.  The  4  per  cent  sterling  bonds  were  that  portion  of  the 
Imperial  5  per  cent  bonds  issued  abroad. 


EFFECTS    OX    PUBLIC    FIN  AN*  I. 
Interest  Paid  on  Bonds 


I  I 


Year 

Imperial 

5  per  cent 

bonds 

Formosan 

industrial 

bonds 

4  per  cent 

British  sterling 

bonds 

Total 

1 893-1 895..  .. 
1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 

Yen 

325,626 
375,ooo 
1,287,979 
2,840,368 
2,840,408 
3,031,241 
3,276,790 
4,127.194 
5,967,454 

Yen 

39,215 
160,812 
347,283 
443,018 

Yen 

3,913,203 
3,907,816 

3.907.934 
3,916,066 

Yen 
325,626 

-  000 
1,287,979 
2,840,368 
2.^40,408 
6.983.659 
7,345.418 
8.382.41 1 
10.326,538 

Total. .  .  . 

24,072,060 

990,328 

15,645,019 

4".7"7.407 

The  interest  payments  amounted  to  40,707,407  yen.  In  ad- 
dition, a  certain  amount  of  expense  was  incurred  in  transferring 
money  from  one  bureau  to  another  account,  or  in  borrowing 
for  the  purpose  of  utilizing  the  money  temporarily  as  capital. 

Of  the  amount  accounted  for  in  the  foregoing  paragraph, 
exclusive  of  interest  payments  on  the  bonds,  the  total  between 
the  years  1896  and  1903  was  451,281,722  yen.  The  sources 
from  which  it  was  obtained  are  as  follows.  It  must  be  noted, 
however,  that  the  fractions  of  one  yen  were  discarded,  so  that 
the  detailed  figures  will  not  coincide  exactly  with  the  total. 

Amount     transferred    from     the  Yen         Percent  Yen  Percent 

general  accounts 76,4851178        ' 

Indemnity  transferred [74,875,542       38   75 

Amount  secured  from  bond  issues: 

[ndusl  rial  bonds 138,846,215       ,v>77 

Railway  bonds 56,106,884       12    13 

Hokkaido  railway  bonds      ...       4,967,900         1.10 

199,921,000       \\  .;" 

As  shown  in  the  foregoing  table,  the  percentage  obtained 
from  the  various  bond  issues  i<>  the  total  needed  \\.i-  44-,v> 
per  c.nt,  the  balance  having  been  transferred  from  the  in- 
demnity (38.75  per  cent)  and  from  the  general  account 
(16.95  per  cent ),  but  these  bonds  were  not  all  issued  at  home. 
About  half  of  them,  that  is,  83,96]  ,800 yen, were  issued  abroad. 
Furthermore,  the  money  which  was  not  obtained  abroad  was 


Il8       ECONOMIC   EFFECTS   OF   THE   SINO-JAPANESE   WAR 

secured  by  transfer  from  the  Treasury  surplus  or  from  special 
account  of  the  indemnity  and  applied  to  the  prosecution  of 
various  undertakings,  as  we  have  explained  before  in  detail. 
Thus,  we  should  note  that  the  funds  for  the  chief  ex- 
penditure for  the  various  enterprises  undertaken  after  the 
Sino-Japanese  War  were  furnished  by  the  indemnity  and  its 
transfer  and  the  importation  of  foreign  capital.  The  success- 
ful importation  of  foreign  capital  was  possible,  it  is  needless  to 
say,  because  the  position  of  Japan  in  the  world  had  been 
raised  by  the  Sino-Japanese  War;  but  it  was  also  due,  we 
believe,  to  the  reform  of  the  currency  system.  This  currency 
reform  in  1897  was  completed  largely  by  means  of  the  in- 
demnity, as  we  shall  explain  elsewhere.  When  we  consider 
this  matter,  we  should  remember  that  the  post-bellum  enter- 
prises had  a  very  close  connection  with  the  indemnity.  That 
the  government  undertook  these  various  aggressive  post-bellum 
enterprises  at  all  was  due  entirely  to  the  indemnity.  Here 
let  us  glance  at  the  disposition  made  of  the  indemnity  which 
furnished  so  great  a  service  to  the  post-bellum  finance  of  our 
country. 

INDEMNITY 

As  a  result  of  the  Sino-Japanese  War,  an  indemnity  was 
obtained  from  China  for  four  purposes,  namely,  for  war 
expenses ;  for  interest  on  the  deferred  payments  of  the  indem- 
nity; for  expense  of  guards  at  Weihaiwei,  and  for  compensa- 
tion for  the  return  of  the  Liaotung  peninsula. 

The  claim  for  indemnity  for  war  expenses  and  for  interest 
on  deferred  payments  was  based  on  the  Treaty  of  Shimonoseki 
signed  April  17,  1895,  Article  IV  of  which  reads  as  follows: 

China  promises  to  pay  to  Japan  200,000,000  taels  in  Kuping  silver  as  an  indem- 
nity for  war  expenses  .  .  .  against  any  unpaid  portions  of  the  indemnity 
after  date  of  first  payment  (that  is  the  payment  of  50,000,000  taels  made  within 
six  months  after  the  ratification  of  the  treaty  of  peace)  interest  at  the  rate  of  5 
per  cent  per  annum  shall  be  paid;  provided,  however,  that  China  may  at  any  time 
pay  the  whole  or  a  part  of  the  indemnity  in  advance  of  the  dates  of  payment;  if  the 
whole  of  the  indemnity  shall  be  paid  within  three  years  after  the  ratification  of  the 
treaty  (or  by  May  8,  1898)  all  interest  on  the  deferred  payments  of  the  indemnity 
shall  be  waived,  and  the  interest  already  paid  up  to  that  time  shall  be  included  in 
the  payment  of  the  principal. 


EFFECTS   ON    PUBLIC    FINANCE 


119 


The  claim  for  the  indemnification  of  the  expenses  of  the 
guards  at  Weihaiwei  was  based  upon  Article  YIII  of  the 
Shimonoseki  Treaty  of  Peace,  as  mentioned  before,  which 
reads  thus: 

China  agrees  to  the  temporary  occupation  of  Weihaiwei  in  the  province  of 
Shantung  by  the  Japanese  army  as  a  guarantee  that  the  terms  of  this  treaty  shall 
be  observed  faithfully     .     .     . 

and  also  upon  Article  I  of  a  separate  agreement  which  stipu- 
lates— 

The  size  of  the  Japanese  Army  which  shall  occupy  Weihaiwei  temporarily  in 
accordance  with  Article  VIII  of  the  treaty  signed  today  shall  not  exceed  one  Jap- 
anese Army  Corps.  China  agrees  to  pay  500,000  tads  [Raping  silver)  a  year,  as 
one-fourth  of  the  expense  of  the  temporary  occupation,  beginning  from  the  day 
said  treaty  shall  be  ratified  and  copies  exchanged. 

The  compensation  for  the  return  of  the  Liaotung  peninsula 
was  based  upon  Article  II  of  the  treaty  concerning  the  return 
of  that  peninsula  which  was  signed  November  8,  1895,  and 
reads : 

The  Chinese  Government  agrees  to  pay  to  the  Japanese  Imperial  Government 
up  to  November  16,  1895,  the  sum  of  30  million  taels  (Kuping  silver),  as  a  compen- 
sation for  the  return  of  the  southern  part  of  Mukden  province. 

As  the  Chinese  Government  paid  in  full  the  entire  amount 
of  the  war-expense  indemnity  by  May  8,  1898,  as  stated 
before,  the  interest  was  waived  in  accordance  with  the  terms 
of  the  treaty,  as  explained  before.  Consequently,  our  country 
received  the  following  amounts  as  a  result  of  the  war: 


Funds 

In  Chinese 
currency 

In  Japanese 
currency 

Taels 
200,000,000 

;><>,ooo,ooo 

I  o<  10,000 

Yen 

311,072,865 

Compensation  for  the  return  of  the  Liao- 

44.('(,7.499 

Expense  of  guards  at  Weihaiwei  for  three 

2,380,103 

Total                            

2.;  1.500,000 

$,360,467 

Interest  for  the  use  of  the  indemnity  fund 

-.--  \ 

231,500,000 

367,248,691 

120        ECONOMIC    EFFECTS    OF   THE    SINO-JAPANESE   WAR 

Considering  the  financial  and  economic  condition  of  our 
country  at  the  time,  the  foregoing  was  indeed  an  enormous 
amount,  and  provided  funds  for  various  undertakings  after 
the  Sino-Japanese  War,  such  as  the  improvement  of  the 
national  defenses  and  other  enterprises;  it  also  led  to  the 
expansion  of  our  annual  budget.  This  is  the  reason  why  we 
have  presented  here  in  such  detail  the  receipts  and  expendi- 
tures in  connection  with  the  indemnity  and  the  effects  of  the 
same  upon  our  finance  and  economy. 

Our  government,  in  laying  financial  plans  after  the  Sino- 
Japanese  War  in  reference  to  the  indemnity,  decided  on  the 
policy  of  applying  it  to  the  redemption  of  the  expenses  of  the 
Sino-Japanese  War,  the  extension  of  the  army  and  navy,  the 
establishment  of  an  iron  foundry,  an  extraordinary  reserve 
fund,  and  a  subsidy  to  the  Bank  of  Agriculture  and  Industry, 
thereby  laying  a  foundation  for  extensive  post-bellum  enter- 
prises. At  the  same  time,  the  indemnity  was  placed  under 
"special  accounts,"  and  separated  from  the  general  accounts 
of  the  government.  We  shall  here  enumerate  the  ways  in 
which  the  indemnity  was  used. 

The  amount  available  for  various  enterprises  was  364,868,- 
587  yen,  but  the  fund  for  the  expense  of  the  guards  at  Wei- 
haiwei  was  from  the  first  placed  under  "general  accounts"  and 
was  separated  from  the  indemnity  account  for  war  expenses. 

Enterprises  for  which  Sino-Japanese  War  Indemnity  was  Employed 

Yen 

(1)  Redemption  of  the  expenses  of  the  Sino-Japanese  War 78,957,165 

(2)  Expenditure  for  army  expansion 56,781,708 

(3)  Expenditure  for  naval  expansion 139,157,097 

I     Expenditure  for  establishing  an  iron  foundry 579,702 

(5)  Extraordinary  war  expenses  for  the  year  1897  and  for  trans- 

portation and  communication 3,214,485 

(6)  Transferred  to  general  accounts  for  the  year  1898 12,000,000 

(7)  Transferred  to  the  Imperial  Household 20,000,000 

(8)  Supplementary  fund  for  warships  and  torpedoes 30,000,000 

(9)  Education  fund 10,000,000 

(10)   Reserve  fund  for  calamities 10,000,000 

Total 360,690,2 1 7 

Amount  available ' 364,868,587 

Amount  employed  for  enterprises 360,690,217 

Balance  (transferred  to  consolidation  fund  of  national  bonds) . .         4,178,370 


EFFECTS   ON    PUBLIC    FINAN<  E  121 

The  details  of  the  revenue  and  expenditures  are  shown  in 
Table  X  and  XI  at  the  end  of  this  chapter.1 

Of  the  foregoing,  the  amount  used  for  the  redemption  of  the 
war  expenses,  that  is,  78,957,165  yen,  was  certainly  used  in 
accordance  with  the  original  purpose  of  the  indemnity.  Not 
only  so,  but  it  had  a  very  salutary  effect  in  the  prosecution  of 
the  bond  policy  after  the  war.  At  first  it  was  the  plan  to  use 
the  indemnity  received  in  1895,  amounting  to  120  million  yen, 
for  the  first  period  of  army  and  navy  expansion.  But  at  that 
time  there  was  urgent  need  of  issuing  bonds  or  borrowing  to  the 
amount  of  100  million  yen  for  the  special  account  of  the  Sino- 
Japane^e  War,  as  this  amount  had  to  be  secured  before 
March,  1896.  Now,  if  the  whole  of  the  war  indemnity 
received  had  been  devoted  to  the  purposes  of  army  and  navy 
expansion  and  the  fund  for  the  Sino- Japanese  War  expenses 
had  been  obtained  by  means  of  bond  issues,  the  major  part  of 
the  indemnity  would  have  been  buried  in  the  Treasury  tor 
three  or  four  years,  while  all  the  time  the  bonds  would  have 
been  drawing  interest — economically,  a  very  wasteful  arrange- 
ment. Besides,  it  would  not  appear  technically  correct  to 
devote  the  indemnity  obtained  from  China  to  expansion  of 
means  of  defense,  without  using  any  portion  of  it  for  the 
redemption  of  the  expenses  of  the  Sino-Japanese  War.  Thus 
the  original  plan  was  dropped  and,  as  mentioned  before,  the 
amount  drawn  from  the  indemnity,  while  the  war  bonds 
were  not  issued,  thereby  adjusting  the  matter  of  the  war 
expenses.  By  these  methods  the  load  on  the  Treasury 
and  the  danger  of  disturbing  the  financial  market  after  the 
war  on  account  of  such  bond  issue  were  avoided.  So  the  less 
apparent  advantages  secured  by  this  change  of  policy  must 
not  be  ignored. 

Now,  regarding  the  20  million  yen  presented  to  the  Imperial 
household  in  1898,  the  government  had  already  decided  upon 
it  in  a  cabinet  meeting  and  was  aboul  to  introduce  a  bill  to 
that  effect  in  the  National  Diet,  when  the  Diet  with  a  unan- 
imous vote  passed  a  resolution  of  it--  own  accord  to  present 

1  Post,  1 1.  150. 


122       ECONOMIC    EFFECTS   OF   THE     SINO-JAPANESE   WAR 

tli is  amount.  This  was  an  expression  of  the  loyalty  of  our 
nation  to  the  Imperial  household ;  and  the  fact  that  the  nation 
did  not  spend  for  administrative  purposes  all  of  the  indemnity 
from  the  war,  but  presented  a  part  of  it  to  the  Imperial 
household  in  order  to  help  toward  perpetuating  the  glory  of 
the  Empire,  should  be  displayed  in  special  type.  In  present- 
ing it  the  government  used  consolidating  bonds  (face  value 
21,022,350  yen,  market  value  19,404,050  yen,  and  war  bonds 
(face  value  645,450  yen,  market  value  595,905  yen),  so  that 
these  bonds  helped  the  money  market  both  directly  and 
indirectly. 

The  three  funds  of  which  this  was  the  foundation,  amount- 
ing in  all  to  50  million  yen,  were  as  follows: 


Item 

Gold  coin  and 
bullion 

Imperial  Government 
bonds 

Cash 

Total 

Amount 

Face  value 

Fundfor  rebuild- 
ing of  battle- 
ships and  tor- 
pedo boats .  . . 

Educational 
fund 

Reserve  fund  for 
natural  disas- 
ters   

Yen 
15,041,827 

Yen 
14.958,173 

9,999-989 
9-999,989 

Yen 

a 
10,775-850 

10,775.850 

Yen 
1 1 
11 

Yen 
30,000,000 

10,000,000 
10,000,000 

Total 

15,041,827 

34,958,151 

22 

50,000,000 

"Face  value,  £1,700,000. 

The  greater  portion  of  these  funds  was  in  bonds.  The 
gold  coins  and  the  gold  bullion,  amounting  to  15  million  yen, 
were  deposited  with  the  Bank  of  Japan  with  the  understand- 
ing that  when  the  specie  reserve  should  be  reduced  to  90 
million  yen,  or  when  the  government  should  have  need,  the 
amount  deposited  should  be  returned  to  the  government. 
Thus  it  had  a  favorable  effect  upon  the  money  market.  Not 
only  so,  but  at  the  time  of  the  Russo-Japanese  War  this 


EFFECTS   ON    PUBLIC   FINANCE  1 23 

special  fund  was  transferred  and  used  for  war  expenses, 
thereby  affording  considerable  assistance  to  the  government, 
which  fact  should  be  mentioned  here. 

The  foregoing  were  thcundertakings  forwhichthe  indemnity 
was  actually  used.  But  the  influence  of  the  indemnity  upon 
our  finance  and  economy  was  not  confined  to  these  uses.  It 
has  been  skilfully  manipulated  to  serve  in  many  other  im- 
portant ways;  for  example,  after  it  was  received  and  until  it 
was  finally  disposed  of,  the  balance  in  hand  had  a  favorable 
effect  upon  the  money  market;  then  again,  in  order  to  prevent 
the  outflow  of  our  specie  it  was  used  as  a  reserve  for  exchange 
transactions;  then  in  1898,  when  bonds  could  not  be  issued  at 
home,  it  was  employed  temporarily  by  a  system  of  transfer; 
and  finally  it  has  helped  the  finances  of  Japan  directly  and 
indirectly  by  enabling  the  government  to  hold  securities  in 
England.  Thus,  while  it  may  be  out  of  place  to  go  into 
detail  regarding  these  matters  in  the  present  discussion,  it  is 
perhaps  important  to  add  this  explanation  to  maintain  a 
proper  balance  in  point  of  relative  importance  of  this  and 
other  effects. 

The  first  thing  to  set  forth  is  the  service  of  the  indemnity 
in  assisting  the  establishment  of  the  gold  standard  system. 
Our  country,  as  we  shall  explain  later,1  long  since  tried  to 
reform  our  currency  system  and  to  change  from  the  double  or 
silver  standard  to  the  gold  standard.  In  October,  1893,  a 
committee  was  organized  to  investigate  the  advantages  and 
disadvantages  of  such  a  change  and  earnestly  to  prepare  for 
it.  But  the  government  could  not  make  the  change  for  a  long 
time  because  the  necessary  gold  reserve  could  not  be  secured. 
When  we  received  the  indemnity  from  China  after  the  Sino- 
Japanese  War  it  was  arranged  to  receive  the  payment  in  British 
gold.  Therefore  the  specie  and  gold  bullion  in  payment  were 
shipped  here  from  England  and  ( >urg<  >ld  a  >ins  were  minted  from 
this,  therel  >y  rendering  practical  >le  the  plan  <  >f  estal  dishing  the 
gold  standard.     Here,  however,  we  must  explain  clearly  that 

1  Infra,  p.  I  59. 


124       ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 

in  executing  this  plan  the  indemnity  itself  was  not  used — the 
coin  was  merely  manipulated  to  produce  this  desired  result. 

Then  again,  the  temporary  balance  from  the  indemnity  ac- 
counts was  invested  in  securities,  thus  employing  it  for  the 
relief  of  the  money  market.  This  step  had  been  highly  con- 
tributory toward  the  betterment  of  our  finances.  For 
instance,  in  the  first  place,  in  March,  1899,  war  bonds  to  the 
amount  of  10  million  yen  were  issued,  but  the  result  of  the 
subscriptions  was  not  favorable,  only  1,500,000  yen  being 
subscribed  for.  So  5  million  yen  out  of  the  remainder  of  the 
bonds  was  subscribed  for  at  face  value  by  the  government  and 
later  these  war  bonds  were  exchanged  for  the  railway  bonds 
held  by  the  Savings  Deposits  Bureau.  The  railway  bonds, 
together  with  the  industrial  bonds,  were  later  called  5  per 
cent  bonds. 

On  January  21,  1898,  both  the  industrial  and  the  railway 
bonds  (face  value  10,807,350  jew,  issue  price  10,168,636  jew) 
were  subscribed  for  on  March  29  at  a  face  value  of  5  million 
yen — issue  price  4,510,500  yen.  The  stringency  of  the  money 
market  after  the  war  did  not  permit  the  issue  of  these  bonds 
in  open  market.  Yet  if  this  capital  could  not  have  been 
obtained,  the  various  undertakings  would  have  had  to  be 
postponed.  Besides,  difficulties  in  economic  circles  were  at 
that  time  increasing  more  and  more.  So  the  government,  in 
order  to  relieve  the  market  and  at  the  same  time  to  manipulate 
the  indemnity  successfully,  decided  to  purchase  15  million  yen  of 
the  Hypothec  debentures  and  35  million  yen  of  public  loan  bonds, 
which  were  purchased  at  96  yen  per  100  yen  of  face  value. 

Of  the  foregoing,  the  subscription  for  the  Hypothec  deben- 
tures was  made  to  help  extend  the  loans  of  the  Hypothec  Bank 
of  Japan  and  also  to  relieve  the  industrial  concerns  in  Osaka 
and  other  places  which  were  in  serious  financial  difficulties  at 
that  time.  The  conditions  of  the  government  subscription 
were  that  the  government  should  take  up  the  remainder  of  the 
whole  amount  of  the  bond  issue  after  the  popular  subscriptions 
to  the  bonds  had  been  taken  into  account,  and  that  the  in- 


I  i  i  l<   is   o\    PUBLIC    FINANCE 


125 


vestment  of  the  capital  should  be  confined  to  export  industries 
in  Osaka,  Kyoto  and  Tokyo,  or  to  goods  which  would  take  the 
place  of  imported  articles.  The  actual  result  of  the  sub- 
scription was  as  follows: 


No. 

Date 

Total 

amount  of 

loan 

Private 

subscription 

Absorbed  1>\ 
indemnity 
accounts 

Total 
issue 

1 
2 
3 
4 
5 

April  11-22,  1898 
April  25-28,  1898 
fune  8-13,   l898 
Oct.    1-10,    1898 
April  1-30,  1899 

Total 

Yen 

1 ,000,000 
1 ,000,000 
1 ,000,000 
2,000,000 
1 ,000,000 

Yen 

477.  ''5" 
44.750 
12,750 

i.H.C'ioo 
305,620 

Yen 

519.45" 
955.250 
987,250 
586,100 
694,380 

IV;; 
0  17.100 

1  .'  H  >O,000 
I  .000,000 
2,000,000 
1 ,000,000 

6,000,000 

2,254.07.. 

3.742,430 

5,997,IOO 

It  is  plain,  therefore,  that  about  62  per  cent  of  the  entire 
amount  of  the  bond  issue  of  6  million  yen  was  absorbed  by  the 
indemnity  accounts.  Next,  we  shall  note  the  circumstance  - 
surrounding  the  purchase  by  the  government  of  the  bonds. 
On  April  15,  1898,  for  the  first  time  an  order  was  issued  to  the 
Bank  of  Japan  to  undertake  the  purchase  ot  the  bonds.  The 
result  was  very  successful,  so  that  in  October  of  the  same  year 
the  money  market  was  gradually  relieved  and  the  interesl 
rate  of  the  Bank  of  Japan  was  reduced.  Therefore  on  ( October 
10,  the  order  to  purchase  the  bondswas  rescinded.  The  entire 
amount  of  the  bonds  thus  purchased  at  that  time  was  38,707- 
770  yen  (face  value)  the  purchase  price  being  36,998,826  yen. 

Again,  on  April  13,  1899,  in  order  to  raise  the  price  of 
bonds,  the  government  decided  to  purchase  an  additional  5 
million  yen  of  bonds,  and  thereby  succeeded  in  raising  the 
market  price  to  the  lace  value  between  April  21  and  June  1 
of  the  same  year. 

We  have  so  far  described  how  the  government  purchased 
the  negotiable  instruments  for  the  purpose  of  relieving  the 
money  market.  Weshallno'w  shou  in  the  following  table  the 
amount  of  the  subscription  by  the  government  for  these  bonds 
and  the  amount  of  purchase: 


126       ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE    WAR 


Government  Subscription  and  Purchase  of  Bonds 


Item 


S  per  cent  bonds: 

Face  value 

Purchase  value.  . 
War  bonds: 

Face  value 

Purchase  value .  . 
Consolidated  bonds: 

Face  value 

Purchase  value .  . 
Navy  bonds: 

Face  value 

Purchase  value.  . 
Kinroku  bonds: 

Face  value 

Purchase  value .  .  , 

Total: 

Face  value 

Purchase  value .  .  . 


Amount  of 
subscription 


Yen 
20,807,350 
19.679.136 


20,807,350 
19,679,136 


Purchase  to 
relieve 
money 
market 


Yen 
2,700 
2,527 

13.446,550 
12,897,288 

21,022,350 
20,146,346 

426,000 
402,045 

3,810,170 
3,550,620 


38,707.770 
36,998,826 


Purchase  to 

preserve 

market 

value 


Yen 


638,600 
638,683 

1,350,800 
1,340,360 


1,989,400 
1,979,043 


Exchange 

with  deposits 

section 


Yen 
3,100,000 
2,966,268 


3,100,000 
2,966,268 


Total 


Yen 
13,910   150 
22,647.931 

14,085,150 
13,535,971 

22,373,150 
21,486,706 

426,000 
402,045 

3,810,170 
3.550,620 


64,604,520 
61,623,273 


Increase  of  taxes  and  development  of 
government  monopoly 

The  expenses  of  the  Sino- Japanese  War  were  principally 
met  by  the  issue  of  bonds  and  the  transfer  of  the  indemnity, 
thus  rendering  the  increase  of  taxes  in  the  main  unnecessary. 
But  when  the  government  expenditure  increased  on  account 
of  various  post-bellum  undertakings,  funds  were  secured  by 
increasing  certain  classes  of  taxes,  by  creating  others,  and 
by  establishing  a  monopoly  on  leaf  tobacco. 

An  increase  in  the  taxes  took  place  twice  after  the  Sino- 
Japanese  War.  The  estimated  amount  of  revenue  from  the 
increase  was  as  follows:  in  the  first  period,  from  the  fiscal  year 
1896,  the  amount  was  33,576,293  yen;  in  the  second,  from 
the  fiscal  year  1899,  it  was  40,346,875  yen;  in  all,  73,923,168 
yen. 

According  to  the  first  plan,  a  business  and  a  registry 
tax  were  newly  established,  a  tobacco  monopoly  also,  and 
the  sa he  tax  was  increased,  while  on  the  other  hand  certain 
classes  of  taxes  were  abolished.  The  intention  was  to  in- 
crease the  net  receipts  to  over  26  million  yen.  The  receipts 
were  estimated  as  follows: 


EFFECTS   ON    PUBLIC    FINANCE  1 27 

Estimated  receipts 
Yen 

Registry  tax  (new)  ("in  force  from  April  1,  1 896; 6,423,993 

Business  tax  (new)    in  force  from  January  I,  1897) 7.551.377 

Sake  tax  (increased)  (in  force  from  October  1,  1896) 9,284,544 

Leaf    tobacco    monopoly    (newly    established)    (in   force 

January  1,  1898) 10,316,379 

Total 33.576,293 

Decrease  from  abolition  of  certain  taxes 7.552.397 

Balance 26,023,896 

Later,  at  the  time  of  the  second  increase,  a  tax  on  tonnage 

was  established,  and  other  taxes  were  increased,  in  order  to 

obtain  a  total  of  42  million  yen  a  year. 

Yen 

Land  tax  (in  force  from  January  1,  1899) 8,475,958 

Income  tax  (in  force  from  April  1,  1899) 1,494,516 

Sake  tax  (in  force  from  January  1,  1899) 22,556,409 

Tonnage  tax  (in  force  from  August  4,  1899) 237,986 

Registry  tax  (in  force  from  April  1,  1899) 1,846,759 

Leaf  tobacco  monopoly  receipts  (in  force  from  April  1,  1899)  .     2,145,550 
Tax  on  convertible  bank  notes  (in  force  from  April  I,  1899)  .  .      1,159,560 

Soy  tax  (in  force  from  March  1,  1899) 1.598,387 

License  to  sell  tobacco  (in  force  from  April  1,  1899) 831,750 

Total 40.346.875 

The  entire  increase  for  the  two  periods  was  roughly  es- 
timated at  73,923,000  yen.  Comparing  this  amount  with  the 
total  amount  of  156,552,359  yen  from  taxes,  stamp  receipts, 
and  the  profits  of  the  leaf-tobacco  monopoly  for  the  fiscal 
year  1900,  the  year  in  which  the  entire  actual  amount  of  the 
increased  taxes  was  to  be  realized,  the  estimated  amount  a- 
mentioned  above  was  about  50  per  cent  of  the  entire  amount , 
and  compared  with  74,697,624  yen,  which  was  the  amount  of 
revenue  from  taxes  as  actually  accounted  for  in  the  fiscal  year 
1895,  the  year  previous  to  the  increase  in  taxrs,  it  i>  seen  t<>  be 
nearly  the  same  as  the  entire  amount  of  the  tax  revenues.  We 
thus  see  how  extraordinary  the  increase  in  taxes  was.  For, 
whereas  in  1895  the  amount  of  revenue  from  various  taxes 
classed  as  indirect  was  34,507,661  yen,  against  the  total 
amount  of  revenue  of  40,189,963  yen  from  the  land  and  ine<  >me 
taxes  classed  as  direct,  in  1900  the  indirect  taxes  amounted  to 
74,788,744  yen  and  the  direct  taxes  to  59,137,351  yen.     The 


128       ECONOMIC    EFFECTS    OF    THE    SINO-JAPANESE   WAR 

ratio  of  these  taxes  to  the  entire  revenue  from  all  the  taxes 
was  as  follows  for  [895  and  1900: 


Year 

Direct 

Indirect 

Per  cent 

Per  cent 

1895 

53-8 

46.2. 

1900 

44.2 

55-8 

We  shall  explain  later  what  kinds  of  taxes  were  classed  as 
indirect,  for  we  must  note  that  these  indirect  taxes  constituted 
one  cause  of  the  extraordinary  rise  in  the  prices  of  commodities 
after  the  Sino-Japanese  War.  We  shall  explain  this  point 
more  in  detail,  under  the  heading  "Fluctuation  in  Prices"  in 
Chapter  VIII. 

We  have  thus  briefly  outlined  the  plan  to  increase  taxes  and 
the  results.  The  reason  why  taxes,  increased  once  in  1896, 
were,  within  a  few  years,  that  is,  in  1899,  again  enormously 
increased  was  because  of  the  extraordinary  increase  in  the 
ordinary  expenditure  arising  from  the  post-bellum  enterprises, 
the  rise  in  prices  consequent  upon  the  economic  changes  made 
after  the  war,  and  the  various  enterprises  undertaken  in 
the  newly  acquired  territories,  since  not  only  were  there 
limitations  to  the  use  of  the  indemnity  but  there  were  diffi- 
culties in  obtaining  funds  for  ordinary  expenditure,  as  the 
market  conditions  of  the  country  at  the  time  did  not  permit 
the  sale  of  bonds.  Naturally,  these  financial  difficulties  led 
to  frequent  political  quarrels  and  change  of  cabinets.  The 
national  Diet  was  next  dissolved  so  that  the  results  just 
stated  could  be  brought  about.  Before  briefly  explaining  the 
newly  established  and  increased  taxes,  we  shall  present  the 
annual  financial  status  in  outline. 

We  have  repeatedly  explained  before  that,  in  order  to  meet 
the  various  expenditures  required  by  the  nation's  develop- 
ment after  the  Sino-Japanese  War,  and  also  to  meet  the  ex- 
panded administrative  expenditure  resulting  from  the  rise  in 
prices  of  commodities  and  in  the  cost  of  labor  consequent  upon 
the  economic  disturbances  after  the  war,  our  country  levied 
increased  taxes  to  meet  the  ordinary  expenditure  and  trans- 
ferred the  indemnity  and  issued  bonds  to  obtain  financial 


EFFECTS    OX    PUBLIC    FINAN<  1  129 

resources  for  the  extraordinary'  expenditure.     But  as  it  was 
expected  that  in  the  fiscal  year  1896  there  would  be  a  deficit 
of  about  20,360,000  yen  in  the  ordinary  revenues  owing  to 
various  expenditures,  such  as  those  for  the  expansion  of  the 
means  of  national  defense,  the  payment  of  the  principal  and 
interest  on  the  war  bonds,  the  Imperial  grants  of  rewards,  the 
annual  pensions,  the  expenditure  for  Formosa  and  for  Wei- 
haiwei,  etc.,  and  also  that  these  various  expenses  would  in- 
crease thereafter,  it  was  estimated  that  the  amount  needed  to 
supply  the  deficit  in  the  annual  revenue  would  be  approxi- 
mately 30  million  yen.     Hence  as  we  stated  before,  a  registry 
tax  and  a  business  tax  were  newly  established,  a  leaf  tobacco 
monopoly  was  instituted,  and  the  sake  tax  was  increased,  so 
that  in  all   an  increase  of  26,023,896  yen  from  taxes  was 
secured.     Although  the  increase  in  taxes  was  thus  effected, 
yet  in  that  fiscal  year  the  revenue  from  the  registry  tax 
amounted  to  only  about  2,720,000  yen  (deducting  the  revenue 
from  abolished  taxes).     The  deficit  so  caused  was  made  good 
by  transferring  an  equal  amount  from  the  surplus  in  the 
Treasury  left  over  from  the  previous  year,  the  government 
being  thereby  barely  enabled  to  balance  the  annual  revenue 
and  expenditure.     The  next  year,  1897,  the  budgetary  item 
for  expenditure  was  also  enormously  increased.     But,  as  tin- 
increase  in  taxes  had  been  effected  in  the  previous  fiscal  year. 
there  was  a  revenue  of  16  million  yen  from  the  increase  (net 
revenue  about   10  million  yen  after  deducting  the  revenue 
from  abolished  taxes),  and  in  addition  a  natural  increase  in 
revenue  from  other  sources;  so  that  the  ordinary  revenue  for 
that  year  showed  an  increase  of  about  20  million  yen  compared 
with  the  previous  year,  thereby  enabling  the  government  to 
maintain  a  reasonable  balance  between  the  annual   revenue 
and  expenditure.     But  until  the  succeeding  year  the  entire 
estimated  amount  of  revenue  from  the  increased  or  newly 
established  taxes  could  not  be  obtained.     So  the  deficit  was 
supplied  from  the  surplus  in  the  Treasury  and  from  a  certain 
amount  transferred  from  the  indemnity.     But  in  1898,  owing, 
on  the  one  hand,  to  an  extraordinary  increase  in  expenditure 


130        ECONOMIC    EFFECTS   OF   THE    SINO-JAPANKSK    WAR 

(amounting  to  about  5  million  yen)  for  the  encouragement  of 
water  transportation,  the  extension  of  shipping  routes,  and  the 
replenishment  of  the  fund  for  various  enterprises  in  Formosa 
(amounting  to  about  10  million  yen)  and  on  the  other  hand,  to 
a  decrease  in  revenue  (amounting  to  about  5  million  yen), 
because  of  the  abolition  of  the  tax  on  registry  of  population, 
the  decrease  of  the  business  tax,  etc.,  there  was  again  a  deficit 
in  the  ordinary  revenue  amounting  to  21  million  yen.  There- 
upon, the  government  tried  to  secure  the  entire  amount  or  an 
increase  of  25  million  yen  from  the  land  and  sake  taxes.  But 
the  net  revenue  from  increased  taxes  for  the  fiscal  year  1898 
amounted  to  only  a  little  more  than  8  million  yen.  The 
revenue  for  this  year  included  about  9,500,000  yen  of  the 
increase  in  the  land  tax,  but  170,000  yen  were  expended  for  the 
collection  of  the  revised  sake  tax,  and  910,000  yen  for  the  ex- 
penses of  land  revaluation,  while  330,000  ;yew  were  estimated  as 
a  decrease  through  the  prohibition  of  home  sake  brewing.  It 
was  planned  to  meet  the  deficit  thus  caused  by  means  of  a 
loan.  But  at  that  time,  the  government — the  Matsukata 
Ministry — lost  control  of  the  political  situation.  The  Diet 
did  not  approve  the  ministry,  and  passed  a  resolution  to  that 
effect.  Thereupon  the  Diet  was  dissolved  and  at  the  same 
time  the  bill  to  increase  the  tax  was  voted  down.  Conse- 
quently, the  only  way  to  supply  the  deficit  was  to  make  use  of 
the  indemnity  or  temporary  loans. 

Thus,  in  a  short  time,  the  Matsukata  Ministry  fell,  and 
the  second  Ito  Ministry  was  formed.  The  new  Diet  formed 
after  the  dissolution  was  commanded  to  assemble  May  19, 
1898.  In  that  year,  as  before  stated,  there  was  a  deficit  in  the 
annual  revenue  and  the  disparity  between  revenue  and  ex- 
penditure was  great.  As  it  was  plain  that  this  situation 
would  be  continued  into  the  following  year,  the  government 
again  planned  an  increase  in  the  taxes  in  order  to  be  ready 
to  meet  any  emergency.  It  was  estimated  that  the  deficit 
in  the  ordinary  revenue  would  be  35  million  yen  as  itemized 
on  the  next  page. 

So,  the  government,  to  offset  this  deficit,  tried  to  obtain  an 


EFFECTS    ON    PUBLIC    FINANCE  I3I 

Yen 

Sundry*  expenses  in  Formosa 1 1 ,240,000 

Encouragement  of  water  transportation  and  extension  of  shipping 

routes 4,870,000 

Redemption  of  bonds 7,000,000 

Prison  expenses  paid  out  of  Treasury 3,550,000 

Fund  established  for  relief  of  sufferers  from  natural  disasters 500,000 

Interest  on  Chitsuroku  bonds •  ',000 

Increase  in  the  ordinary  expenditure  on  account  of  the  rise  in  prices.  .  6,860,000 

New  enterprises  on  account  of  revision  of  treaties  with  foreign  countries  2,550,000 

Total 37,0.-50,000 

Excess  of  revenue 1 .500,000 

Balance  (deficit  in  revenue) 35, 530,000 

increase  in  revenue  from  the  land  tax  of  17,550,000  yen,  the 
income  tax  of  1,640,000  yen,  and  the  sake  tax  of  12,410,000 
yen,  totaling  31,600,000  yen.  In  addition,  an  increase  was 
planned  from  the  telegraph  services,  430,000  yen,  from  the 
railway  profits,  3,240,000  yen,  totaling  3,600,000  yen,  which 
would  bring  the  grand  total  of  increase  to  35,200,000  yen. 
But  the  Diet  considered  it  unreasonable  to  deliberate  upon  an 
increase  in  annual  revenue  not  accompanied  by  corresponding 
expenditure.  Therefore,  the  bill  for  revision  of  the  land  tax 
regulations  was  rejected  by  a  great  majority  on  June  10,  1898. 
The  Diet  was  again  dissolved,  and  the  Ito  Ministry  fell  on 
June  30.  The  Okuma  Ministry  which  succeeded  also  fell  on 
October  31  of  the  same  year,  on  account  of  troubles  among  the 
members  of  the  party,  and  was  followed  by  the  Yamagata 
Ministry. 

In  reviewing  the  budget  for  the  year  1899,  we  find  thai  the 
revenue  amounted  to  188,738,437  yen  and  the  expenditure 
to  226,344,792  yen,  the  deficit  in  revenue  being  37,606,355  yen. 
The  following  are  the  principal  items  of  increase  in  the  or- 
dinary expenditure  which  account  for  this  deficit : 

Encouragement  of  water  transportation  and  extension  <>f  shipping 

routes 3,790,462 

Sundrj  expenses  in  Formosa 12,121,597 

Army  expenses    ■  .-75  310 

Navy  expenses ,v57~ 

Army  expansion 5,1  (.0,798 

I  emporary  repair  of  warships  and  torpedoes \  )<>  ).;- 

Sundry  expense-  in  connection  with  revision  ol  treaties  and  execu- 
tion of  laws  in  pracl  ice    1,961,425 

Sundry  expenses  for  education    1  508,310 

Increase  in  expenditure  of  various  government  departments  6,141,562 

fotal 35.95 


132        ECONOMIC    II  I  l<   IS    OF   THE    SINO-JAPANESE   WAR 

There  was  also  urgent  need  for  effecting  the  payment  of 
prison  expenses  out  of  the  treasury  reserve  and  for  establish- 
ing a  fund  for  the  relief  of  sufferers  from  natural  disasters. 
For  these  purposes,  the  sum  of  46  or  47  million  yen  was 
required,  but  as  the  indemnity  had  already  been  allotted  to 
various  uses,  only  a  very  small  amount  remained  available. 
As  for  a  new  bond  issue,  that  was  out  of  the  question  at  this 
time  when  the  money  market  was  so  tight.  But  as  the  fore- 
going items  were  practically  of  the  nature  of  ordinary  expend- 
iture, a  second  period  of  tax  increase  was  planned.  Ac- 
cordingly, the  rates  on  land,  income,  sake,  registry,  convertible 
bank  notes,  soy,  and  tobacco  business  were  raised,  the  rate  of 
revenue  from  the  leaf -tobacco  monopoly  was  increased,  and  a 
revenue  from  postoffice  and  telegraph  service  was  planned, 
amounting  in  all  to  42,020,219  yen.  These  taxes  have  been 
discussed  before,  but  we  may  here  mention  the  fact  that  in 
anticipation  of  the  proceeds  to  result  from  the  new  tax  law  the 
deficit  in  the  annual  revenues  was  made  up  by  a  transfer  of  a 
part  of  the  indemnity.  The  first  increase  in  taxes  yielded 
33)576,293  yen  additional  revenue,  the  second,  42,020,219 
yen,  a  total  of  75,596,512  yen.  But  in  the  early  part  of  1900 
the  Boxer  troubles  occurred  in  China  and  on  June  26  of  the 
same  year  Imperial  Emergency  Ordinance  No.  277  was  issued, 
authorizing  the  government  to  use,  for  the  Boxer  punitive 
expedition,  a  part  of  the  three  funds  which  had  been  estab- 
lished with  the  indemnity  obtained  from  China,  viz.,  (1)  for 
building  warships  and  torpedo  boats,  (2)  for  meeting  emer- 
gencies from  natural  disasters,  and  (3)  for  promoting  education. 
Before  the  end  of  1900,  28  million  yen  from  these  funds  had 
been  employed  for  the  aforesaid  purpose.  Accordingly,  in 
1 901,  an  attempt  was  made  to  repay  the  Boxer  expenditure 
and  reimburse  these  three  funds  by  raising  the  taxes  on  sake 
and  sugar  and  raising,  or  at  least  regulating,  the  customs 
tariff  rates,  since  it  had  been  decided  to  replace  revenue 
raised  from  bond  issues  with  that  raised  from  taxation.  It 
was  decided  to  raise  additional  revenue  from  the  leaf -tobacco 
monopoly  also.     The  bill  to  increase  the  taxes  was  vigorously 


EFFECTS    ON    PUBLIC   FIN  AM   I  1 33 

opposed  for  a  time  by  the  House  of  Peers.  But  after  an 
Imperial  order  had  been  issued,  the  bill  was  successfully  passed, 
and  the  various  bills  as  passed  were  put  in  force  from  October  i , 
1 90 1 .  As  stated  before,  the  increase  in  taxes  for  the  year  1901 
was  planned  principally  for  the  purpose  of  repaying  the  ex- 
penses of  the  Boxer  war.  But  as  the  expenditure  of  the 
money  thus  raised  was  not  confined  to  this,  a  further  increase 
soon  became  necessary.  Such  were  the  evil  effects  of  the 
post-bellum  enterprises.     We  shall  here  tabulate  the  increase 

from  the  various  taxes  as  follows : 

Yen 

Beer  tax 229,047 

Revised  tariff  regulations 141.374 

Sugar  consumption  tax 2,718,867 

Leaf-tobacco  monopoly  price  changed 3,204,287 

Total 6,293,575 

This  increase  amounted  to  about  6  million  yen  so  that  the 
whole  increase  reached  about  82  million  yen.  We  shall  leave 
the  detailed  explanation  concerning  the  foregoing  various 
kinds  of  taxes  to  the  volume  dealing  with  the  investigation 
of  taxes  and  shall  here  confine  ourselves  to  saying  a  few- 
words  concerning  the  development  of  government  enterprises. 

After  the  Sino-Japancse  War,  the  newly  planned  or  ex- 
tended government  enterprises  were  the  tobacco  monopoly, 
the  railways,  the  iron  foundry,  and  the  post  and  telegraph 
offices.  The  reasons  for  starting  said  enterprises  were  as 
follows:  The  iron  foundry  was  considered  indispensable 
for  defense  purposes,  the  extension  of  the  railways  was  planned 
in  order  to  develop  the  wealth  of  the  nation,  and  as  to  tin- 
reform  in  the  regulations  for  postal  and  telegraphic  service 
and  railway  freight  made  in  the  year  1899,  this  was  made  for 
quite  other  purposes  than  the  replenishment  of  the  annual 
revenues.  The  leaf-tobacco  monopoly,  on  the  other  hand, 
was  started  altogether  for  the  replenishment  of  the  annual 
revenues,  and  was  the  first  of  the  monopolistic  enterprises 
undertaken  by  Japan. 

As  we  have  already  briefly  described  the  iron  foundry  in 
discussing   the   extension   of   national    defenses,    and    shall 


[34        ECONOMIC    EFFECTS    OF   THE    SINO-JAPANESE   WAR 

explain  the  extension  of  railways  in  Chapter  VI,  we  shall  here 
dwell  chiefly  upon  the  leaf- tobacco  monopoly. 

The  leaf-tobacco  monopoly  is  especially  notable  for  two 
reasons,  first,  because  out  of  the  entire  budget  the  amount 
secured  from  its  revenues  was  the  largest  in  the  financial 
program  hurriedly  formulated  after  the  Sino-Japanese  War1 
(in  the  first  period  of  tax  increase,  10,316,379  yen;  in  the 
second  period,  2,145,550  yen,  total  12,461,929  yen),  and 
second  because  with  its  institution  the  monopoly  system  was 
first  established  as  a  government  enterprise.  It  may  indeed 
be  proper  to  discuss  the  subject  here  as  one  development  of 
government  enterprises;  but  especially  because  it  belongs  to 
the  class  of  consumption  taxes,  it  is  explained  here. 

The  leaf-tobacco  monopoly  was  established  to  replace  the 
stamp  tax  on  manufactured  tobacco  provided  for  in  the 
tobacco-tax  law  of  1876.  The  annual  revenue  from  the 
stamp  tax  had  been  very  small,  in  1876  amounting  to  only 
80,000  yen.  Later,  it  increased  to  between  50,000  yen  and 
60,000  yen  for  about  seven  years.  In  1884,  as  a  result  of  the 
revision  of  the  law,  the  revenue  reached  approximately  1,000,- 
000  yen,  and  after  the  revision  of  1889,  between  1,500,000 
yen  and  2,300,000  jew.  But  if  the  rate  of  a  tax  be  raised  the 
tax  is  liable  to  be  dodged  and  the  object — to  secure  an  increase 
in  revenue — frustrated.  Thus  the  tobacco  monopoly  came 
to  be  established,  with  the  object  of  controling  the  sale 
legally.  The  government  was  to  supervise  the  raising  of 
tobacco,  and  the  tobacco  raisers  to  secure  a  special  permit 
from  the  government  to  raise  tobacco  and  to  sell  the  crop  to 
the  government,  after  inspection,  before  harvesting  or  after 
the  crop  had  been  dried.  They  were  not  permitted  to  dispose 
of  this  to  private  parties  or  to  consume  it  privately,  and  the 
government,  after  purchasing,  was  to  sell  to  the  tobacco 
manufacturers,  thereby  securing  a  margin  of  profit.  This 
plan  was  executed  from  January  1,  1898,  in  accordance  with 
Leaf-Tobacco  Monopoly  Law  No.  35,  promulgated  on  March 
27,  1896. 

1  Article  12,  Leaf-Tobacco  Monopoly  Law  Xo.  35. 


EFFECTS   OX    PUBLIC    FINANCE  135 

To  be  more  specific,  the  government  had  the  privilege  of  mo- 
nopolizing the  sale  of  all  the  leaf  tobacco  produced  but  must 
sell  the  produce  at  a  fair  price,  the  producers  being  required  to 
report  their,  products  to  the  government.  The  produce  left 
over  in  the  hands  of  the  tobacco  manufacturers  1  ief<  »re  January 
I,  1898,  which  was  the  date  of  the  execution  of  the  new  law, 
was  to  be  governed  l>y  the  tobacco  tax  law  in  force  before  that 
date.  But  at  that  time,  the  import  tariff  rate  of  our  country 
was  very  low  in  accordance  with  the  old  treaty  stipulations, 
so  the  importation  of  foreign  tobacco  increased  considerably; 
the  more  so  as  the  direct  exportation  of  leaf  tobacco  was 
permitted  to  the  producer  without  first  selling  it  to  the 
government. l  Unscrupulous  merchants  often  took  advantage 
of  this  right  and  thus  the  desired  result  of  the  monopoly 
system  could  not  be  obtained.  Therefore,  on  January  1 ,  1 899, 
the  tariff  law  was  reformed  and  the  existing  evils  removed,  as 
by  Law  No.  28,  issued  on  March  1,  1899,  the  government  was 
to  buy  or  import  leaf  tobacco.  Again,  the  manufacture  of 
tobacco  or  the  monopolistic  sale  of  leaf  tobacco  was  permitted 
to  those  securing  a  license  issued  on  payment  of  a  fee  (in  the 
case  of  manufacturers,  50  yen  each  for  manufactures,  and  50 
yen  each  for  dealers).  This  was  done  to  increase  the  revenue 
by  raising  the  rate. 

The  government,  as  a  basis  for  estimating  the  profit  from 
the  monopoly,  fixed  the  average  price  of  manufactured 
tobacco  throughout  the  country  in  1894  at  22  sen  per  100 
momme  (1  momme  =  58  grains  troy).  From  this  four  sen,  four 
rin,  and  two  mo  of  stamp  tax  was  deducted,  ><>  that  the  net 
market  price  was  fixed  at  17.5s  sen.  Since  100  momme  of 
manufactured  tobacco  requires  14.S0"  momme  of  leaf  tobacco 
as  material,  at  the  aforementioned  market  price  loo  momme 
of  leal  tobacco  would  be  worth  12.157  sen.  The  rate  of 
revenue  for  the  government  from  this  was  fixed  at  55  per 
cent  so  that  the  amount  of  revenue  for  the  government 
was  4.248  sen.  But  the  average  selling  price  of  leaf 
tobacco  by  the  growers   was   lived    at    5.084   sen   per   100 

1  Article  1^,  Leaf-Tobacco  Monopoly  I  aw  No.  35. 


I,V>        I  ( ONOMIC   EFFECTS   OF   THE   SINO-JAPANESE   WAR 

momme.    The  following  table  will  show  the  basis  of  monopoly 

]>  rices: 

Sen 

Profit  of  the  treasury  (35  per  cent.) 4.248 

(  ommission  for  brokers  for  transportation  (1 1  per  cent.)  .......        1 .026 

Sundry  manufacturing  expenses  (about  20  per  cent.) 2  .000 

Profit  of  the  manufacturers  and  of  the  dealers  (33  per  cent.) .  .  .  .        4 .027 

Total 16.385 

If  this  total  is  compared  with  the  price  of  leaf  tobacco,  that 
is  12.137  sen>  to  which  the  stamp  tax  of  3.034  sen  must  be 
added,  making  a  total  15. 171  sen,  it  will  be  seen  that  as  a 
result  of  the  tobacco  monopoly  established  by  the  government 
the  market  price  would  become  higher  by  about  1.2 14  sen. 

Now,  according  to  the  estimate  of  the  government,  the 
entire  production  of  leaf  tobacco  throughout  the  country 
amounted  to  24,285,260.182  kwan1  and  at  the  rate  of  4.248  sen 
of  profit  per  100  momme  for  the  government,  as  per  the  fore- 
going table,  the  revenue  of  the  government,  it  was  estimated, 
would  be  10,316,379  yen.  But  the  actual  results  of  the 
monopoly  did  not  come  up  to  this  estimate,  as  will  be  shown 
below.  In  the  year  1901  the  profits  of  the  government 
amounted  to  10,866,699  yen>  but  if  we  remember  that  the  rate 
of  profit  then  was  150  per  cent,  we  may  realize  what  the 
situation  was. 

The  annual  amount  of  leaf  tobacco  produced  throughout 
the  country  for  several  consecutive  years  was  as  follows: 


Amount 
produced 

Amount 
received  by 
government 

Price  paid  by 
government 

Price  per 

kwan 

1898 

Kwan 
8,280,882  ' 
13,714,724 

13,315.291 
8,484.374 

8,349.505 
11,506,790 

Kwan 

8,177,711 
13,493.327 
13.309.991 

8,626,506 

8,430,071 
11,474,249 

Yen 
5.967,625 
8,039,214 
7,720,610 
5,792,281 
6,123,339 
8,660,353 

Yen 
0.730 
0596 
0.580 
0.671 

1899 

1900 

1901 

1902 

0.726 
0-755 

1903 

Total 

63,651,566 

63.5u.855 

42,303.422 

1  1  kwan  =  S\  lbs.  av 


EFFECTS    ON    PUBLIC    FINANCE 


137 


Now  the  rate  of  revenue  was  based  upon  84  per  cent  of  the 
purchase  price  paid  (the  monopoly  on  imported  tobacco  was 
commenced  from  1899  and  the  purchase  price  was  based  upon 
the  same).  Later,  from  July,  1898,  to  August,  1900,  the 
rate  increased  to  100  per  cent;  from  August  22,  1900,  to  130 
per  cent;  in  the  year  1901  it  was  150  per  cent;  and  in  the  year 
1902  between  140  and  180  per  cent. 

The  amount  and  the  percentages  of  profit  are  given  below, 
in  a  table  which  will  show  that  the  estimated  revenue  was  at 
last  obtained  in  the  year  1902. 


Expense  of 

procuring  leaf 

tobacco 


Profit 


Percentage  of 
profit 


1897... 
1898.  .  . 
1899... 
1900.  .  . 
1901 . . . 
1902. . . 
1903- •• 

Total 


Yen 

375-005 
5,867,618 
8,040,416 
8,221,584 
6,840,999 
6,921,933 
9.743.213 


Yen 

292,141 

5,145,999 

7,559.533 

7,244.159 

10,868,699 

12,367,569 
14,898,291 


Per  cent 

779 

86.2 

94.0 

88.1 

158.8 

178.8 


46,010,768 


58,376,391 


126.87* 


*  Average. 

Now,  at  the  time  of  the  increase  in  taxes,  in  1902,  it  was 
planned  to  obtain  1,673,344  yen  from  the  post  and  telegraph 
revenues;  while  the  direct  object  was  not  to  replenish  the 
annual  revenue,  yet  the  change  in  the  telegraphic  rate  and  the 
railway  fare  produced  an  increase  of  over  2,200,000  yen  in  the 
annual  revenue.  With  this  increase,  telegraphic  apparatus 
was  increased,  wires  were  extended,  and  the  means  of  com- 
munication were  otherwise  improved  in  order  to  help  the 
development  of  the  government  enterprises. 

Local  Finance 

As  the  finance  of  the  central  government  expanded  after 
the  Sino-Japancse  War,  so  the  expenditure  of  the  local 
governments  for  educational  and  industrial  development 
expanded  proportionately,   to  keep  pace  with   the  national 


I38        ECONOMIC    EFFECTS    OF   THE    SINO-JAPANESE    WAR 


development.  The  following  table  will  show  the  general 
increase  in  the  annual  expenditures  of  prefectures,  cities, 
towns  and  villages,  which  are  the  local  self-governing  units  of 
our  country. 

Increases  in  Annual  Expenditures  of  Prefectures,  Cities,  Towns  and 

Villages 


Fiscal  year 

Prefectures 
(Do,  Fu,  Ken) 

Cities 

(Shi) 

Villages 
(Cho  and  Son) 

Comparison 
annual  ex- 
penditure from 
national 
treasury 

1 893 

1 00.0 
106.0 
101 .2 

129. 1 
163.4 
170.3 
197-8 
212.3 
219.6 
236.8 
245  6 

100. 0 
114. 8 
138.8 
176.8 
235-0 
250.8 
343-2 
435  6 
506.1 
593  ° 
589-7 

100. 0 

IIO.O 

119. 7 

134-3 
170.2 

193-5 
223.3 
263.0 
296.6 

311  5 

3164 

100. 0 

1894 

1895 

92 
100 
199 

283 

259 
300 

346 
315 
342 
295 

4 
9 

1896 

9 

1897 

4 

1898 

8 

1 899 

5 

1900 

1 

1901 

5 

1902 

0 

1903 

1 

As  shown  in  the  foregoing  table,  the  expansion  of  the 
finance  of  the  local  government  was  much  the  same  propor- 
tionately as  that  of  the  nation.  In  the  case  of  cities  the 
percentage  of  increase  was  especially  great.  The  table  on  page 
139  will  show  the  percentage  of  various  items  of  expenditure 
of  the  local  governments  to  the  total  and  also  the  percentage 
of  increase  in  the  expenditure  in  the  year  1904  compared  with 
that  of  the  year  1895.1 

The  table  on  page  139  shows  that  of  the  various  items  of 
expenditures,  those  for  construction  and  for  the  police  in 
prefectures,  those  for  construction,  education  and  bond  issues 
in  cities,  those  for  construction,  education  and  offices  in  towns 
and  villages,  amounted  to  enormous  sums.     It  shows,  again, 

1  In  the  annual  expenditure,  prefectural  expenses  for  sanitation  are  included 
among  other  items,  also  the  prison  expenses  were  turned  over  to  the  national  dis- 
bursements, in  the  year  1902.  The  administration  of  the  police  and  the  prisons  is 
a  governmental  work  and  does  not  belong  to  the  incorporated  local  communities, 
so  that  these  expenses  of  administration  do  not  appear  in  the  expenditure  of  cities, 
towns  and  villages. 


EFFECTS   ON    PUBLIC   FINANCE  139 

Ratio  of  Expenditures  of  1904  and  Rate  of  Increase  over  1895 


Prefectural 
expenditure 

City  expenditure 

Town  and  village 
expenditure 

Percentage 

Rate  of 

Percentage 

Rate  of 
increase 

Percentage 

Rate  of 
increase 

16.15 
31-55 
12.30 

2.90 

6.79 
3.88 

26.70 

101  .2 
148.9 
659.1 

8130 

4104 
102.9 

14  32 
22.05 

0.36 

4.81 

13-53 

8.49 

0.58 

35-87 

721  .6 
385  9 

257  4 
795   3 

8051 

278.4 

58.7 

427.5 

16.51 
35-82 

1 .21 
5  94 

s'65 
23.16 

1.08 
10.63 

250.1 

Encouragement     of     in- 

504- 1 

5466 

Prison  expenses  for  pre- 

1.2694 

Office           

112. 0 

62.3 

979-2 

Total 

100.00 

145.6 

100.00 

4897 

100.00 

216.4 

that  the  percentage  of  increase  was  especially  remarkable  in 
educational,  industrial,  sanitation  and  bond-issue  expenditure. 
This  shows  how  the  local  governments  have  been  endeavoring 
to  improve  education  and  to  develop  wealth  to  keep  pace  with 
the  central  government  and  help  in  the  advancement  of  the 
nation.  It  was  indeed  in  keeping  with  the  general  tendency 
to  encourage  the  post-bellum  enterprises  of  the  nation. 
Table  XII  at  the  end  of  this  chapter1  shows  the  percentage  of 
increase  in  educational,  sanitation,  industrial  and  bond-issue 
expenditure. 

The  expenditure  for  education  mentioned  in  the  foregoing 
table  refers  to  that  of  local  communities,  that  is,  for  public 
schools  and  the  general  education  of  the  people.  The  ex- 
penditure for  sanitation  was  for  preventing  disease,  for 
disinfection,  and  for  arrangements  for  public  sanitation.  The 
expenditure  for  encouragement  of  industries  was  made  to 
encourage  agriculture,  industry  and  commerce.  All  these 
were  calculated  to  help  conserve  and  increase  the  national 
power,  but  appeared  in  the  local  government  budgets  only  in 
connection  with  the  post-bellum  enterprises  of  the  nation. 

As  for  the  direct  financial  effects  of  the  war,  there  must 
have  been  various  item-  of  expenditure,  such  as  the  expense  oi 

1  Post,  p.  151. 


I40       ECONOMIC    EFFECTS    OF   THE    SINO-JAPANESE   WAR 

farewell  receptions  for  the  soldiers  who  went  to  the  front,  the 
relief  of  the  survivors  of  the  dead,  and  other  similar  items, 
which  would  have  increased  the  expenditure  considerably. 
But  the  exact  data  are  lacking  and,  besides,  the  patriotism  of 
our  countrymen,  their  enthusiasm  to  serve  their  country,  the 
ardent  desire  of  the  people  to  relieve  their  own  relatives,  have 
created  the  sentiment  that  it  is  a  great  honor  to  die  at  the 
front  and  have  lessened  the  burdens  of  the  local  government 
in  relieving  the  survivors  of  the  dead,  so  that  it  will  not  be 
far  wrong  to  state  that  the  expenditure  for  these  purposes  did 
not  burden  the  local  governments  very  much. 


EFFECTS    OX    PUBLIC    FINANCE 


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150       ECONOMIC   EFFECTS   OF   THE    SINO-JAPANESE   WAR 
Table  X. — Revenue  for  Post-bellum  Enterprises  and  Annual  Balance 


Interest  on 

Compensation 

Fisc 

al     War  expense 

for  return  of 

Total 

Amount 

Balance 

yea 

r         indemnity 

Liaotung 
Peninsula 

increase  and 
decrease 

revenue 

expended 

Yen 

Yen 

Yen 

Yen 

Yen 

Yen 

1805 

.  .      74,143,054 

44,907,499 

93,624 

119,144,177 

78,957,165 

40,187,012 

1896 

83,719,110 

911.65-2 

84,630,762 

11,789,389 

113,028,385 

18Q7 

.  .      34,869,189 

7,071,097 

41,940,286 

40,360,796 

114,607,875 

1898 

.  .     118,341,511 

1,341,450 

119,682,961 

66,187,071 

168,103,765 

1899 

311,277 

311,277 

82,636,90s 

85,778,137 

1900 

661,313 

661,313 

31,240,140 

55,i99,3io 

1901 

1,705.783" 

1,705,783° 

20,883,427 

32,610,100 

1902 

155.337s 

155.337s 

13,866,937 

18,587,826 

1903 

147,073 

147,073 

9.S14.215 

9,220,684 

1904 

57,849 

57,849 

3.544.375 

5,734.158 

1905 

154,009 

154,009 

1,709,797 

4,178,370 

To 

tal    311,072,864 

44,907,499 

8,888,224 

364,868,587 

360,690,217 

4,178,370 

B  Decrease. 


Table  XI. — Expenditures  for  Post-bellum  Enterprises 


Redemption 

Extraordi- 

Amount 
transferred 

of  Sino-Jap- 
anese  War 

Estab- 

nary war 
expendi- 

Fiscal 
year 

expenses, 
and  transfer 

Army 
expansion 

Naval 
expansion 

lishment 
of  iron 

ture  and 
expenses  of 

perial  house- 
hold and  to 

Total 

to  General 

foundry 

communi- 

Accounts 

cation 

funds 

Fund 

bureau 

Yen 

Yen 

Yen 

Yen 

Yen 

Yen 

Yen 

1895... 

78,957,165 

78,957,165 

1896. .  . 

7,588,356 

4,043,729 

157,304 

11,789,389 

1897..  - 

16,193.396 

20,633,455 

383.156 

3,150,789 

40,360,796 

1898..  . 

12,000,000° 

8,932,554 

25. 151. 519 

39,302 

63.696 

20,000, 000b 

66,187,071 

1899..  • 

6,053,980 

26,582,925 

50,000,000° 

82,636,905 

1900. .  . 

8,121,594 

23,118,546 

31,240,140 

1901. .  . 

5,346,896 

15,536,531 

20,883,427 

1902. .  . 

3,083,189 

10,783,748 

13.866,937 

1903.. 

1,258,552 

8,255,663 

9. 514. 215 

1904..  . 

94.431 

3,449,944 

3,544,375 

1905..  ■ 

108,761 

1,601,036 

1,709,797 

Total 

90,957.165 

56,781,709 

139,157.096 

579.762 

3,214,485 

70,000,000 

360,690,217 

•  General  Accounts  Fund. 


b  Imperial  Household. 


Various  Funds. 


EFFECTS    OX    PUBLIC    FINANI  E 


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CHAPTER  III 
EFFECTS   ON  THE  MONEY  MARKET 

At  the  time  of  the  Sino- Japanese  War,  our  economic  world 
bore  the  burden  of  war  expenses  amounting  to  about  236 
million  yen  and  met  the  issue  of  100  million  yen  of  war  bonds. 
Such  an  enormous  bond  issue — and  during  war  time  too — 
had  never  been  heard  of  before  in  Japanese  history.  So  the 
government  was  careful  not  to  burden  the  people  too  heavily, 
and  by  employing  the  Bank  of  Japan  devised  a  suitable  and 
effective  financial  policy  whereby  financial  circles  were  enabled 
to  pass  quite  tranquilly  through  the  war. 

When  diplomatic  negotiations  between  Japan  and  China 
assumed  a  serious  aspect,  in  June,  1894,  financiers  and  econ- 
omists entertained  grave  anxiety.  To  understand  the  situa- 
tion we  must  realize  that  the  financial  policy  of  the  government 
at  that  time  was  to  prevent  stagnation  in  the  circulation  of 
capital  by  restricting  the  construction  of  railways.  So  the 
Bank  of  Japan  raised  the  loan  interest  rate  on  June  18,  1894, 
from  1.9  sen  per  diem  (6.935  per  cent  per  annum),  which  had 
been  the  rate  in  force  from  February  8,  1894,  to  2  sen  per  diem 
(7.3  per  cent  per  annum).  The  economic  world  was  struck 
with  terror;  for,  be  it  remembered,  war  with  a  foreign  country 
was  something  of  which  the  people  of  Japan  had  only  read  in 
books  on  history  and  of  which  they  had  not  had  the  least 
direct  personal  experience.  They  were  profoundly  disturbed 
by  the  idea  of  crossing  arms  with  China — a  great  nation 
hoary  with  age — and  feared  they  knew  not  what  great 
economic  convulsion.  The  banks  throughout  the  country 
called  in  their  capital,  restricted  their  loans,  and  were  anxious 
only  to  protect  themselves;  the  industrial  world,  expecting  a 
decrease  in  the  demand  for  goods  during  the  war,  restricted 
production;  the  people  turned  their  attention  altogether  to 
economy,  and  commerce  shrank;  then,  again,  the  Chinese 
residing  in  Japan,  fearing  that  as  a  result  of  the  opening  of 

152 


EFFECTS   ON    THE    MONEY    MAKKI-.I  153 

hostilities  paper  currency  might  greatly  fall  in  price,  would  not 
accept  anything  but  silver  in  payment,  and  demanded  a 
premium  of  i\  per  cent  on  paper  currency — so  great  was  the 
apprehension  felt  by  economic  circles ! 

But  when  the  war  began  and  arms  were  actually  crossed 
between  Japan  and  China,  the  Imperial  Japanese  Army  at 
once  won  a  great  victory  and  there  was  strong  confidence  in 
the  minds  of  the  people  that  the  final  outcome   would  be 
favorable  to  Japan.     This  restored  confidence  in  the  money 
market,  which  then  became  very  firm.     When  the  war  bonds 
were  issued,  the  people  were  moved  by  patriotism  and  the  re- 
sult of  the  popular  subscriptions  to  the  bonds  was  very  good. 
The  interest  rate  was  very  low,  only  5  per  cent,  and  this  had 
a  great  effect  in  quieting  the  market,  because  at  that  time 
financiers  had  an  idea  that  if  the  interest  rate  on  the  bonds 
was  very  high,  general  interest  rates  would  become  high  also. 
As  had  been  explained  before,  the  whole  financial  world 
was  seriously  shaken  up  at  the  commencement  of  this  inter- 
national war  and  at  the  same  time  the  people  in  general  were 
deeply  influenced  toward  economy,  so  that  with  the  exception 
of  the  articles  of  daily  necessity  and  war  materials,  the  de- 
mand for  merchandise  decreased  considerably.     Then  again, 
owing  to  the  dislocation  of  land  and  water  transportation 
facilities  on  account  of  the  pressing   need  of    transporting 
troops  and  war  materials,  the  accumulation  and  disposition 
of  commercial  articles  was  hindered  and  consequently  the 
operation  of  capital  was  affected  seriously.     The  prices  of 
daily  necessities  and  also  of  war  materials  rose  at  the  place-  <  >1 
consumption.     So    commerce   experienced    great   depression 
and  the  demand  for  industrial  capital  decreased  greatly.  How- 
ever, foreign  vessels  were  chartered,  and  by  this  means  the 
defect  in  water  transportation  facilities  was  remedied  and  the 
circulation  of  money  greatly  facilitated.     These  steps  helped 
somewhat  in  restoring  commercial  prosperity. 

Furthermore,  as  regards  foreign  trade,  it  was  at  first  ex- 
pected that  trade  with  China  and  Korea  would  be  most 
seriously    affected.     But    the    government    devised    various 


154        ECONOMIC   EFFECTS   OF   THE   SINO-JAPANESE   WAR 

means  of  relief  for  the  China  trade,  and  furnished  the  needed 
financial  facilities,  so  that  the  dislocation  of  trade  proved  to  be 
only  temporary.  After  our  country  had  secured  control  of 
the  sea,  especially,  the  China  trade  did  not  suffer  seriously. 
As  for  trade  with  Korea,  no  bad  effects  from  the  war  were 
felt  there,  either,  after  navigation  was  made  safe.  The 
American  route  was  from  the  beginning  perfectly  safe  and 
European  trade  suffered  no  ill  effects  at  all.  Both  routes 
being  free  from  disturbance,  a  tendency  toward  constantly 
increasing  development  was  shown. 

While  there  was  thus  no  particular  disturbance  to  com- 
merce either  at  home  or  abroad,  the  currency,  affected  by  the 
war  expenditures,  was  gradually  inflated,  as  is  shown  in  Table 
I  at  the  end  of  this  chapter.1 

Thus  on  the  restoration  of  peace  (April  30,  1895),  compared 
with  conditions  at  the  beginning  of  the  war  (June  30,  1894) 
there  was  an  increase  of  about  44  million  yen  and  on  December 
31,  1895,  of  about  85  million  yen.  This  inflation  of  the 
currency  was  caused  by  an  increase  in  the  issue  of  coins  and 
paper  currency  and  by  the  payments  made  from  the  Treasury. 
These  were  results  of  the  war  expenditure,  for  this  expenditure 
of  about  200  million  yen  was  made  with  various  kinds  of 
specie,  while  the  government,  as  one  of  its  financial  measures 
during  war  time,  spent  the  money  at  home  as  much  as  possible, 
so  that  naturally  coin  and  paper  currency  increased  consider- 
ably. The  following  table  will  show  the  facts  as  to  the  in- 
crease of  convertible  notes  out  of  paper  money. 


Date 


January  31,  1894 

June  30,  1894 

December  31,1 894 

January  31,  1895 

April  30,  1895 

December  31,  1895 

Comparison  with  J  u  ne  30, 1 894 : 

December  31,  1894 

December  31,  1895 


Bank-note 

Specie 

Reserve 

Extra  limit 

issue 

reserve 

securities 

issue 

Yen 

Yen 

Yen 

Yen 

147,372,199 
141.736,358 
149,813,700 
142,756,092 
132,839,984 
180,336,815 

84,515,404 
79,632,988 
81,718,291 
80,924,075 
68,532,320 
60,370,797 

62,856,795 
62,103,370 
68,095,409 
61,832,017 
64,307,664 
119,966,018 

4.197.549 
55.083,148 

8.077.342s 
38,600,457" 

2,085,303" 
I9,262,i9ib 

5.992,039" 
57,862,648" 

5,499,640" 
56,385,239" 

1  Post,  p.  196. 


»  Increase. 


b  Decrease. 


Reserve 
power  of 

issue 


Yen 

299,973 
1,302,091 

2,547,265 
7,618 


EFFECTS    OX    THE    MONEY    MARKET  1 55 

Judging  from  the  foregoing  table,  we  find  the  specie  re- 
serve was  not  greatly  affected  during  the  war.  Even  in  the 
securities  reserve  there  was  a  certain  amount  of  reserve 
strength  of  issue  left,  so  that  the  financial  condition  for  war 
time  was  excellent.  After  the  war  the  specie  reserve 
rather  decreased,  and  the  extra-limit  issue  was  effected;  for 
the  effect  produced  on  the  securities  resent  issue  during  this 
period  was  due  to  the  increase  or  decrease  of  the  specie  re- 
serve as  the  case  might  be.  The  decrease  of  an  enormous 
amount  of  specie  reserve  after  the  restoration  of  peace  was 
altogether  due  to  (i)  the  payments  in  silver  made  for  war 
expenses,  (2)  the  paying  out  of  convertible  notes,  as  these  were 
especially  demanded  by  the  Chinese  merchants,  and  (3)  the 
unfavorable  balance  of  foreign  trade.  Aside  from  these  fad  s, 
the  general  condition,  as  to  deposits  and  loans,  of  the  Bank 
of  Japan  and  the  private  banks,  as  well  as  the  interest  rate, 
remained  normal,  as  we  shall  explain  later;  so  that  except  for 
the  precautionary  attitude  which  was  taken  during  war  time 
there  was  nothing  particularly  noteworthy  in  the  situation. 

Thus  we  see  that  during  the  war  finances  were  in  an  un- 
usually normal  condition.  To  be  sure,  an  enormous  amount 
of  money  was  spent  for  the  war  without  any  return  and  200,- 
000  men  were  called  out  of  productive  industries  to  the  front, 
thereby  restricting  the  productive  power  of  the  nation  and 
causing  a  change  in  the  industrial  order,  so  that  it  was  im- 
possible to  prevent  economic  changes  later,  the  seeds  of  which 
were  indeed  germinating  during  the  war.  Nevertheless  it  is  a 
fact  that  conditions  similar  to  those  of  peace  were  maintained 
during  war  time.  The  following  may  1  »e  gr\  en  as  the  principal 
reasons  why  this  was  possible: 

(1)  The  war  itself  was  a  stimulus  to  the  mind-  of  the  people, 
and  a  potent  cause  in  producing  thoughtful,  conservative 
action.  We  have  noted  at  first  how  excessive  precautions 
were  taken,  how  the  money  market  at  once  became  tight, 
demand  for  capital  decreased,  owing  to  fears  as  tol  he  financial 
future,  and  idle  capital  increased,  because  owing  to  the  pre- 
cautions of  business  men  lucrative  ways  of  disposing  of  it 


I56       ECONOMIC    EFFECTS    OF   THE    S1NO-JAPANESE   WAR 

could  not  be  found.  All  these  things  helped  to  prevent  the 
expected  panic  in  the  money  market.  In  other  words, 
money  circulation  shrank  not  from  real  necessity  but  for  psy- 
chological reasons. 

(2)  The  financial  policy  of  the  government  was  duly 
carried  out,  since  (a)  stagnation  of  capital  for  railway  enter- 
prises was  prevented,  (b)  interest  on  bonds  was  lowered,  (c) 
special  attention  was  paid  to  the  collection  and  circulation  of 
the  funds  secured  from  bonds,  (d)  suitable  steps  were  taken 
for  facilitating  commercial  transactions. 

(3)  The  activity  of  the  Bank  of  Japan  was  altogether  be- 
yond that  necessitated  by  the  consideration  of  immediate 
profits  for  herself,  having  for  its  object  the  securing  of  the  wel- 
fare of  the  nation.  Loans  were  restricted  or  bonds  redeemed 
and  at  the  same  time  the  fund  secured  by  bond  issues  was  fur- 
nished to  the  people  for  their  use,  and  the  government  was 
supplied  with  capital  as  loans  to  meet  the  urgent  need  of  war. 
On  the  other  hand,  the  convertible  notes  were  controlled  and 
the  interest  rate  was  preserved  from  fluctuation. 

(4)  Besides  the  Bank  of  Japan,  the  influential  banks  of 
Tokyo,  Osaka  and  other  cities,  in  order  to  facilitate  the 
circulation  of  money  in  war  time,  cooperated  with  the  Central 
Bank  in  facilitating  the  issue  of  bonds,  or  subscribed  for  the 
bonds  themselves  and  restricted  their  loans,  in  order  to  pre- 
vent the  equilibrium  of  financial  circles  from  being  disturbed. 

(5)  The  nation  expected  that,  as  a  result  of  repeated 
success  at  the  front,  the  final  victory  would  be  with  Japan. 
The  minds  of  business  men  were  set  at  ease  and  there  was  no 
further  anxiety  entertained  as  to  money  circulation  for  the 
future. 

These  various  reasons  combined  to  quiet  the  money  market 
in  time  of  war.  But  this  was  only  a  temporary  phenomenon. 
As  has  been  said,  the  extraordinary  financial  conditions  after 
the  war  were  being  germinated  during  the  war.  These 
conditions  led  to  frequent  fluctuations  after  the  war  which 
were  only  relieved  just  before  the  Russo-Japanese  conflict. 

\\  lien  the  Sino- Japanese  War,  the  only  international  war 


EFFECTS   ON    THE   MONEY   MARKET  I  57 

Japan  had  waged  since  the  Restoration,  ended  in  a  glorious 
victory  for  Japan,  and  an  enormous  indemnity  was  obtained 
and  the  Liaotung  Peninsula  and  Formosa  were  ceded  to  us, 
the  Japanese  nation  first  became  conscious  of  her  real  strength, 
and  various  important  national  movements  then  had  their 
inception.  In  the  world  of  thought,  the  idea  of  "Japanism," 
as  it  was  called,  was  cherished;  in  the  economic  world  the 
former  pessimism  gave  place  to  optimism;  while  an  incn 
in  extravagance  together  with  the  gendering  of  a  spirit  of 
enterprise  were  the  results  of  these  national  movements. 

But  before  this  stimulation  produced  any  substantial  re- 
sults, the  interference  of  the  European  Powers  in  the 
peace  negotiations  with  China  came  suddenly,  dealing  a 
severe  blow  to  the  nation.  The  optimism  which  had  just 
been  expanding  was  altogether  subdued.  We  shall  not  take 
the  time  or  trouble  to  describe  this  interference,  as  it  is  already 
a  fact  well  known  to  the  world.  Just  how  it  enraged  our 
nation  may  be  realized  by  recalling  the  fact  that  the  Nihon, 
a  daily  newspaper  edited  by  Dr.  Yujiro  Miyake,  a  noted 
critic,  reported  the  news  of  the  return  of  the  Liaotung  Penin- 
sula to  the  people  by  issuing  an  extra  headed  with  these 
words  "Urgent  Imperial  Message  has  been  issued." 
"Who  that  has  red  blood  in  his  veins  will  not  read  it  with 
tears?"  And  the  forty  million  people  affected  did  indeed 
look  at  this  unjust  interference  with  bloody  tears.  The 
Taiyo,  a  political  review,  under  the  title  of  "Patient,  Watch- 
ful Waiting,"  said:  "We  must  repay  the  good  will  of  the 
Three  Powers,  as  we  are  not  a  nation  who  would  forget  the 
favors  of  others."  Thus  the  so-called  "Patient,  Watchful 
Waiting"  and  the  " Ten- Years'  Plan,"  became  the  watchwords 
of  the  time  and  gave  the  people  the  opportunity  to  reflect. 
These  watchwords  were  in  keeping  with  the  national  move- 
ment which  was  started  by  the  war  and  led  to  the  realization 
of  the  plan  of  a  big  army  and  navy  and  of  replenishing  the 
nation's  wealth;  thus  a  heavy  burden  was  laid  upon  the  pe<  »ple 
owing  to  the  expanded  financial  program  of  the  government. 

However,  the  depression  in  economic  circles  caused  by  the 


I58        ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 

ret  recession  of  the  Liaotung  Peninsula  did  not  last  long.     The 
national    self-realization,    which    resulted    from    the   victory, 
materialized  in  the  world  of  thought  as  "  Japanism,"  while  in 
the  economic  world  a  national  movement  was  also  inaugu- 
rated.    So,  although  the  spirit  of  the  nation  was  sadly  de- 
pressed at  first  because  of  the  return  of  the  Liaotung  Peninsula, 
in  an  incredibly  short  time  confidence  was  restored,  as  the 
people  were  buoyed  up  by  the  expectation  of  a  large  indemnity 
to  be  received  from  China,  and  the  spirit  of  enterprise  was 
born  again.     At   this  opportune   time   the   Bank  of  Japan 
instituted  the  policy  of  encouraging  enterprises  by  loosening 
its  purse,  so  that  the  spirit  of  enterprise  became  widespread, 
its  heartening  influence  being  in   inverse   ratio  to  the  de- 
pression caused  by  the  return  of  the  Liaotung  Peninsula. 
Consequently,  the  tendency  to  frugality  which  was  favored 
during  the  war  was  very  generally  superseded  by  extrava- 
gance, prices  rose, — though  this  was  not  the  only  cause, — 
foreign  trade  showed  an  excess  of  imports  over  exports,  and 
the  business  world  experienced  a  complete  change.     Although, 
as  we  have  stated   before,   the   "Ten- Years'   Plan"   was  a 
serious  proposition,  considering  the  national  strength  at  the 
time,  yet  it  was  easily  executed  on  account  of  the  rising  spirit 
of  the  nation ;  and  this  enterprising  spirit  rose  as  the  result  of 
the    aforementioned    national    movement    in    the    economic 
world.     But  as  during  the  war  industrial  capital  had  been 
absorbed  in  war  expenditure,  and  after  the  war,  in  the  various 
enterprises  undertaken  by  government  and  people,  capital 
became  suddenly  static.     Then,  besides,  the  greater  part  of 
the  indemnity  received  from  China  was  spent  for  unproduc- 
tive purposes,  which,  so  far  from  helping  capitalists,  caused 
the  evils  which  naturally  accompany  the  inflation  of  currency. 
Moreover,  the  securities  reserve  note  issue  of  the  Bank  of 
Japan  was  increased  more  and  more.     The  result  was  the 
encouragement  of  a  spirit  of  extravagance,  and  a  rise  in  prices, 
which  placed  various  difficulties  in  the  way  of  materializing 
the  enterprising  spirit  of  the  time,  and  even  made  political 
trouble.     The  ministry  was  changed  several  times.     Conse- 


EFFECTS    ON    THE    MONEY   MARK!   I  1 59 

quently  the  national  movement  for  progressive  enterprises 
whieh  arose  after  the  war  was  cheeked,  and  the  high  spirits  of 
the  nation  were  depressed,  and  finally  the  finan<  ial  distress 
experienced  after  the  war  led  to  a  slight  panic  in  1899.  This 
was  not  perfectly  relieved,  and  another  panic  occurred  in  1901. 
The  national  movement  also,  which  had  promised  great 
things  at  the  close  of  the  war,  was  kept  from  expanding,  and  in 
this  condition  the  nation  had  to  meet  the  Russo-J  a]  tanese  War. 
The  financial  ups  and  downs  during  the  Sino-Japanese  War 
and  ten  years  thereafter  have  been  briefly  explained.  We 
shall  now  proceed  to  set  forth  financial  conditions  during  that 
time  by  taking  up  the  most  important  points  in  connection 
therewith. 

Reform  of  the  Currency  System 

Japan  established  the  gold  standard  monetary  system  by 
Law  No.  16,  promulgated  on  March  26,  1897. 

The  monetary  system  of  our  country  prior  to  this  time  had 
been  based  upon  the  bimetallic  system  established  by  the 
Tokugawa  Shogunate  in  the  sixth  year  of  Keicho,  1 601,  and 
maintained  for  260  years  or  until  the  period  of  the  Restoration 
of  Meiji.  But  whenever  financial  distress  occurred  the 
metallic  money  was  reminted,  and  except  during  the  reform 
of  the  Kyoho  period,  the  weight  of  the  coins  was  reduced  and 
the  quality  debased,  so  that  the  currency  system  in  this  way 
destroyed  itself.  In  feudal  times  some  anion-  the  Daimios 
coined  moneys  with  their  own  imprints  thereon  and  issued 
notes  to  circulate-  only  in  their  own  territory,  and  there  were 
1,600  or  more  different  kinds  of  notes  in  circulation.  In 
short,  in  the  lasl  days  of  the  Tokugawa  Shogunate  our  mone- 
tary system  was  at  the  extreme  height  of  disorder  and  com- 
plexity. 

The  government  attempted  to  readjust  matters  in  the  early 
part  of  the  Meiji  era.  In  May,  1871,  a  new  currency  law- 
was  promulgated,  thereby  laying  the  basis  for  the  gold-stand- 
ard system.  According  to  this  law,  the  yen,  containing  t.5 
grams  of  pure  gold  about  900  and   i|  grams  of  alloy  was 


l6o       ECONOMIC   EFFECTS   OF   THE   SINO-JAPANESE   WAR 

made  the  unit  of  currency.  There  was  besides  this  system, 
another  with  a  trade  silver  yen,  the  same  in  quality  and 
weight  as  the  Mexican  silver  dollar  current  in  the  Orient 
as  the  unit  of  trade  currency.  Now  the  trade  silver  yen 
was  circulated  only  within  open  ports.  But  at  that  time, 
inconvertible  notes  were  issued  in  our  country,  so  that  specie 
flowed  out  in  a  great  stream,  and  it  was  felt  that  to  maintain 
a  gold  standard  system  among  silver  countries  in  the  Orient 
was  a  very  difficult  task.  So  in  May,  1878,  Laws  Nos.  12 
and  13  were  issued,  whereby  the  trade  silver  yen  was  ordered 
for  general  circulation  at  home,  in  paying  taxes,  and  for  pub- 
lic and  private  transactions.  From  that  time,  Japan  became 
a  bimetallic  country. 

The  government,  owing  to  the  civil  war  and  other  momen- 
tous events  in  the  early  part  of  Meiji,  found  it  difficult  to 
meet  all  its  needs  by  means  of  Treasury  revenue  alone.  So 
it  was  obliged  to  issue  the  following  varieties  of  notes  in 
order  to  secure  temporary  relief : 


Date  of  Issue 


Total  Amount  of  Issue 


Kinds 


(1)  Dajokwan  Notes  (Cabinet) 
May  15,  1868-Dec.  31,  1869.  . 

(2)  Mimbusho  Notes  (Notes  is- 
sued by  Dept.  of  People)  Sept. 
17,  1869-Oct.  31,  1870 


(3)  Convertible  Notes  by  Finance 
Department,  Oct.  12,  1871- 
Feb.  28,  1872.' 


48,000,000  ryo 

7,500,000  ryo 
(At  first  it  was  in- 
tended to  redeem 
the  Dajokwan  notes 
of  small  denomina- 
tions with  these 
notes.) 


6,800,000 


10  ryo,  5  ryo,  1  ryo,i 
bu,  1  shu. 

2  bu,  1  bu,  2  shu,  1  shu. 


(4)  Convertible Notesby Colonial 
Department,  Jan.  14,  1872- 
Mar.  31,    1872 


2,500,000 


10  yen,  5  yen,  I  yen. 


10  yen,  5  yen,  1  yen,  50 
sen,  20  sen,  \osen. 


But  when  the  daimiate  system  was  abolished  and  the  pre- 
fectural  system  was  established  in  1871,  the  notes  issued  by 
different  daimiates  had  to  be  taken  over  by  the  central 
government ;  thus  it  was  necessary  to  increase  the  notes  of  the 


EFFECTS   ON   THE   MONEY   MARKET  l6l 

central  government  to  aid  in  this  adjustment,  and  finally 
new  government  notes  were  issued.  The  inconvertible  notes 
suddenly  increased  to  an  enormous  amount.  According  to 
the  proclamation  of  December  27,  1871,  concerning  the  issue 
of  new  notes,  these  notes  were  to  be  circulated  in  exchange  for 
the  notes  of  different  daimiates.  As  a  result,  the  former 
became  inconvertible  notes.  Then,  when  the  Civil  War  of 
1877  broke  out  in  the  southwest,  the  government  was  obliged 
to  issue  notes  to  the  amount  of  27  million  yen  temporarily  in 
order  to  meet  the  war  expenses.  As  the  notes  in  circulation 
exceeded  the  need  of  the  economic  world,  there  was  a  sudden 
rise  in  the  prices  of  commodities.  Furthermore,  by  Decree 
No.  104,  issued  in  August,  1876,  the  law  governing  national 
banks  (Law  No.  349,  November  15,  1872)  was  revised.  The 
regulations  allowing  the  national  banks  to  issue  bank  notes 
with  6  per  cent  bonds  redeemable  in  gold  notes  as  security1 
were  revised,  so  that  bonds  bearing  4  per  cent  intercut  were 
allowed  to  be  used  as  security.  The  maximum  total  issue  of 
bank  notes  was  fixed  at  34  million  yen.  After  that,  these 
bank  notes  were  issued  in  large  amounts.  But  as  they  were 
convertible  with  the  currency  then  in  circulation,  namely, 
government  paper  money,  the  prices  of  the  notes  fell  con- 
siderably, the  prices  of  commodities  rose,  the  specie  flowed 
out,  the  imports  exceeded  the  exports,  and  farmers  became 
extravagant  in  their  expenditures.  The  evil  effects  were  very 
serious  and  one  who  reviews  the  history  of  that  period  can  not 
but  be  horrified  thereby. 

In  consequence  the  government  made  strenuous  efforts  to 
revise  the  currency  system,  on  the  one  hand  redeeming  tin- 
notes,  and,  after  the  establishment  of  the  Bank  of  Japan  in 
June,  1882,  ordering  that  bank  to  issue  convertible  silver 
banknotes  from  May,  1885;  and  on  the  other  hand,  endeavor- 
ing to  accumulate  specie  reserve,  thereby  gradually  restoring 
the  credit  of  the  government  notes.  The  market  value  of 
the  notes  increased  accordingly,  and  at  the  end  of  1885  the 

1  These  were  authorized  for  the  purpose  of  replacing  the  government  notes  then 
in  circulation. 


[62        ECONOMIC    EFFECTS   OF   THE   SINO-JAPANESE   WAR 

difference  between  silver  and  the  notes  nearly  vanished.  So 
from  January  I,  1886  (according  to  Decree  No.  14,  issued 
June  6,  1885)  government  notes  could  be  converted  into 
silver  at  par.  In  addition,  the  plan  of  redeeming  the  national 
hank  notes  was  also  established  by  Decree  No.  14,  issued  in 
1883,  and  thus  our  country  became  a  true  silver  standard 
country.  Previous  to  this,  from  about  1871,  the  production 
of  silver  all  over  the  world  increased  and  the  price  of  silver 
showed  signs  of  declining.  When  Germany,  in  1873,  es- 
tablished the  gold-standard  system  by  utilizing  the  indemnity 
received  as  a  result  of  the  Franco-Prussian  War  and  began  to 
dispose  of  the  silver  in  her  possession,  the  price  of  silver  fell 
still  more.  Then  when  the  United  States  of  America,  the 
Latin-Alliance  nations,  and  other  countries  adopted  the 
gold-standard  system,  and  restricted  or  stopped  the  minting 
of  silver  coins,  thus  initiating  the  policy  of  excluding  silver 
and  gathering  in  gold,  the  price  of  silver  fell  considerably 
lower.  In  1876,  the  ratio  between  gold  and  silver,  in  price, 
was  on  an  average  1  to  17.88.  Whereupon  the  silver- 
producing  countries  and  those  which  possessed  silver  began  to 
discuss  methods  of  maintaining  the  price  of  this  metal.  The 
United  States  of  America  was  especially  noteworthy,  as  in 
1878  she  passed  the  Brand  Law,  whereby  silver  was  purchased 
and  minted,  and  in  1890  the  Sherman  Law,  which  extended 
the  scope  of  the  former  statute.  But  both  failed  to  prevent 
the  steady  fall  in  the  price  of  silver.  Consequently,  Austria- 
Hungary,  in  1892,  changed  her  monetary  system,  adopting 
the  gold  standard,  and  in  1893  the  United  States  of  America 
revoked  the  Sherman  Law.  India  also  abolished  the  free 
coinage  of  silver.  Other  countries  likewise  ceased  using  silver 
for  coins.  As  a  result,  in  1894  the  ratio  between  gold  and 
silver  became  on  an  average  1  to  32.56. 

After  this  explanation,  it  is  not  necessary  to  show  in  detail 
how  Japan,  which  was  virtually  a  silver-standard  country, 
was  affected.  On  the  one  hand,  following  the  fall  in  the  price 
of  silver,  the  exports  of  our  country  increased  and  the  prices 
of  commodities   rose,   so   that    agricultural,   industrial    and 


EFFECTS    ON    THE    MONEY    MARKET 


163 


commercial  circles  were  benefited  and  became  quite  prosper- 
ous; but  on  the  other  hand,  the  foreign  exchange  rate  was 
constantly  fluctuating  so  that  those  engaged  in  foreign  trade 
were  in  danger  of  monetary  losses  and  could  not  transact 
business  with  the  certainty  as  to  profits  or  losses  previously 
assured,  but  had  to  wait  idly  until  the  fluctuations  in  the 
exchange  rate  became  a  little  less  serious  or  were  obliged  to 
venture  forth  depending  only  upon  luck.  Consequently, 
transactions  became  speculative  and  business  dealings  with 
gold-standard  countries  assumed  a  state  of  impasse,  which  in 
turn  produced  an  unfavorable  result  upon  the  money  market. 
Below  we  indicate  the  tendencies  of  the  exchange  rates  in 
London,  Paris  and  Berlin: 

Rates  of  Exchange  in  London,  Paris  and  Berlin 


Year 

London 

Pa 

ris 

Berlin 

Highest 

Lowest 

Highest 

Lowest 

I  tighest 

Lowest 

s.      d. 

5.      d. 

/• 

/• 

VI. 

m. 

1886. 

3.04.04 

3.00.13 

4.21 

3-79 

3  35 

3  03 

1887. 

3.03.80 

301. 32 

4.19 

3 

93 

3-34 

3   13 

1888. 

3.01.58 

3  00.05 

3-95 

3 

79 

3-16 

3.01 

1889. 

3.02.52 

3.00.36 

4  03 

3 

84 

3  22 

3  06 

1890. 

3.09.08 

3.01 . 10 

4-73 

3 

92 

3-78 

3   i- 

1891. 

30519 

3.01.32 

4-33 

3 

93 

3    \" 

3   15 

1892. 

300. 51 

2.08.64 

3  84 

3 

43 

3  08 

2  75 

i«93- 

2.08.73 

2.03.87 

3-44 

2 

92 

^■77 

2  36 

1894. 

2.03.50 

1 . 1 1 . 50 

2.87 

2 

45 

2  31 

i«95- 

2.02.88 

1. 11. 13 

2.83 

2 

43 

-   -7 

1 .96 

For  these  reasons,  the  Japanese  Government  planned  to 
change  the  silver-standard  system  into  the  gold  standard,  and 
in  accordance  with  Imperial  Ordinance  No.  113,  issued  on 
October  14,  1893,  appointed  a  committee  to  investigate  the 
currency  system  and  to  learn  the  cause  of  the  fluctuation  in 
the  prices  of  gold  and  silver;  also  whether  there  was  need  of 
reforming  the  currency  system  of  our  country,  because  of  Un- 
economic effects  which  the  fluctuation  in  the  prices  of  gold 
and  silver  produced  in  Japan,  and  if  their  was  such  nerd, 
what  system  should  be  adopted.  The  committee  by  a  ma- 
jority vote  decided  to  adopl  the  gold-standard  system. 


1 64        ECONOMIC    EFFECTS   OF   THE   SINO-JAPANESE   WAR 

But  the  reform  could  not  be  accomplished  by  means  of  a 
set  of  laws.  A  large  amount  of  gold  reserve  was  needed. 
From  1 87 1  until  the  gold  standard  was  established,  the  total 
amount  of  silver  issued  was  on  its  face  value  165,133,710  yen. 
It  was  not  an  easy  matter  to  accumulate  a  gold  reserve  suffi- 
cient to  convert  this  amount  of  silver  into  gold,  and  it  was 
necessary  to  wait  for  a  favorable  opportunity.  However, 
an  agreement  was  finally  reached  whereby  the  war  indemnity 
of  the  Sino-Japanese  War,  which  was  to  have  been  received 
in  Kuping  taels,  was  received  in  British  gold  in  London.  With 
this  amount  the  gold-standard  system  was  established. 

In  discussing  the  proposition  of  establishing  the  gold- 
standard  system,  some  suggested  that  it  would  be  advan- 
tageous to  plan  the  development  of  trade  with  gold-standard 
countries  in  view  of  the  fall  in  the  price  of  silver,  or  objected 
that  if  Japan  alone  should  adopt  the  gold-standard  system 
while  various  other  countries  in  the  Orient  were  silver-stand- 
ard countries,  she  would  encounter  serious  obstacles  in 
carrying  on  trade  with  those  countries;  it  was  also  said  that, 
as  the  production  of  gold  in  our  country  is  too  small  for  our 
needs,  it  would  be  difficult  to  maintain  the  gold-standard 
system  permanently,  and  that  when  the  large  amount  of 
silver  exported  abroad  should  be  reimported  into  Japan,  the 
nation  would  meet  with  great  losses.  In  spite  of  all  these 
objections,  the  government  decided  to  adopt  the  gold-stand- 
ard system. 

While  the  foregoing  were  the  alleged  reasons  for  making 
this  change,  there  was  still  another  reason,  namely,  the  money 
market  conditions  of  that  time;  for  it  is  plain  now  that  if 
silver  fell,  the  investment  of  capital  by  gold-standard  countries 
in  Japan,  which  was  still  a  silver  country,  would  decrease,  and 
the  capital  already  invested  would  be  recalled.  This  was  not 
clearly  seen  at  the  time,  since  our  finances  had  received  bad 
effects  from  the  post-bellum  undertakings  and  showed  signs  of 
abnormality,  resulting  in  the  contraction  of  the  money  circu- 
lation and  the  falling  of  prices  of  shares  in  the  stock  market. 
Thus  the  opinion  came  to  prevail  in  financial  circles  that  if  the 


EFFECTS   ON   THE    MONEY    MARKET 


165 


gold-standard  system  were  adopted  at  that  time  the  obstacles 
between  Japan  and  the  gold-standard  countries  would  be 
removed  and  the  cheap  capital  of  countries  more  advanced 
commercially  would  at  once  be  invested  here;  for  this  reason 
there  were  not  a  few  who  favored  the  gold-standard  system. 
Accordingly  the  bill  for  currency  reform  was  passed  by  both 
houses  immediately,  and  by  Law  No.  16,  issued  March  26, 
1897,  the  new  system  was  put  into  operation.  Thus  from 
October  1  of  the  same  year,  Japan  became  a  gold-standard 
country. 

That  the  financial  world  thus  desired  to  see  the  gold- 
standard  system  established  because  of  the  conditions  which 
existed  at  that  time  may  be  gathered  from  the  fact  that 
when  the  news  was  circulated  in  the  stock  market,  securities 
rose  in  price.     A  few  examples  are  cited  below : 

Effect  of  Currency  Reform  Bill  on  Stock  Exchange 


N.  Y.  K. 

Tanko 
Railway 

Sanyo 
Railway 

Kanega- 

fuchi 
Spinning 

Tokyo 

Stock 

Exchange 

Rumor  of  Bill  being 
introduced: 

Previous  day 

On  the  day 

Rise 

Yen 

78.10 

79 -50 

1 .40 

Yen 

87.70 

89.80 

1 .  10 

Yen 

53  90 

55  10 

1  .20 

Yen 

60.00 

61 .00 

1 .00 

Yen 

369-50 

376.00 

650 

Introduction  in 
House  of  Commons: 

Feb.  26 

March  I 

Rise 

79-50 

81  .30 

1  .80 

98.80 
99.80 

1  on 

55  10 

56.40 

1  -30 

61 .40 

62.00 

0.60 

•i  00 
386.00 

10.00 

Approved  by  Special 
Committee    of    the 
1  louse: 

Previous  day 

March  6 

Rise 

7570 

77  30 
1    60 

95.80 
97 -30 

1  50 

55  00 

55  20 

0.20 

6i  .60 

(>2  .  IO 
O.5O 

369  9 1 

;,:<>.  00 

9  50 

Passed  by  the  House: 

Previous  day 

March  12 

Fluctuation 

76.90 

76.60 

0 .  30 

97-50 

98.   ID 
O.6O 

55  00 
55.60 

0.60 

61 .10 

386.00 

Passed  by  Peers: 

Previous  day 

March  23 

Fluctuation 

76.90 

76.60 

030 

99  30 

101 . 10 

1.80 

55  30 

55-70 

0  .40 

62.10 
62. 10 

385.00 

402 .00 

17.00 

166     economic  effects  of  the  sino-japanese  avar 

Expansion  of  Issue  Capacity  of  Convertible  Notes 

The  revised  law  governing  the  issue  of  convertible  bank 
notes  issued  in  March,  1899,  raised  the  amount  of  the  securi- 
ties reserve  issue  from  85  million  yen  to  120  million  yen.  This 
was  due  to  the  fact  that  the  government  believed  the  in- 
creasing stringency  of  the  money  market  indicated  a  shortage 
of  capital  or  currency  (bank  notes),  and  previous  to  that 
period  the  bank  notes  were  almost  always  issued  in  excess 
of  the  settled  limitation.  What,  then,  was  the  condition  of  the 
extra-limit  issue  of  notes?  Before  we  discuss  this  matter,  we 
must  describe  the  securities  reserve  issue  of  notes  by  the  Bank 
of  Japan,  especially  the  history  of  the  extra-limit  issue. 

The  Bank  of  Japan  was  established  as  a  central  bank  on 
October  10,  1882,  at  the  time  when  inconvertible  notes  (both 
government  and  bank  notes)  fell  in  price,  in  order  to  meet  the 
emergency,  in  accordance  with  Decree  No.  32,  issued  on  June 
27,  1882,  setting  forth  the  purpose  of  the  bank.  Beginning 
from  September  8,  1886,  the  bank's  notes  were  issued,  in 
accordance  with  Decree  No.  18  of  May  26,  1885,  regulating 
the  issue  of  convertible  bank  notes. 

At  first  the  bank  was  required  to  keep  only  a  reasonable 
amount  of  reserve  specie  to  redeem  the  bank  notes  issued.1 
The  Minister  of  Finance  occasionally  suggested  the  amount  of 
notes  to  be  issued,  and  the  reserve  for  the  exchange  was  at 
first  limited  to  specie.  But  later  the  government  notes  and 
bank  notes  were  constantly  being  adjusted,  so  that  at  the  end 
of  June,  1889,  the  amount  of  government  notes  on  hand  was 
49,337,248  yen,  and  of  bank  notes  28,059,486  yen.  Compar- 
ing these  figures  with  the  highest  amounts  of  the  various 
notes  in  circulation,  we  see  what  an  extraordinary  amount  of 
redemption  had  been  effected. 

As  there  were  49,177,864  yen  worth  of  notes  on  hand  on  the 
last  day  of  June,  1888,  there  was  after  all  a  decrease  of  43,- 
582,880  yen.  Consequently,  the  currency  decreased  con- 
siderably in  amount.     So  the  government  firmly  established 

1  Article  2  of  the  same  decree. 


EFFECTS    ON    Till-;    MONEY    MARKET 

Redemption  of  Bank  Notes 


167 


Not<  s 


Government  notes.  . 
National  bank  notes. 
Total  amount  of  vari- 
ous notes 


Date 


Feb.  28,  1878 
Feb.  28,  1879 

Jan.  31,  1880 


1  [ighest 
amounts  of   |      Amount 
various  notesjune  30,  18 
in  circulation 


Yen 

141,274,862 

28,347,876 

i7o.i57.477 


Yen 

49.337.248 
28,059,486 

77.396.733 


Decrease, 

June  30,  (888 

compared 


Yen 

9i.937.6i5 
288,390 

92,760,744 


the  system  of  conversion  and  in  addition  decided  that  the 
time  to  do  away  altogether  with  the  former  currency  system 
had  now  come.  So  the  laws  governing  the  issue  for  the 
conversion  of  the  convertible  bank  notes  were  revised.  While 
in  principle  issuing  bank  notes  with  gold  and  silver  specie  or 
gold  and  silver  bullion  as  a  reserve  (that  is,  an  issue  based  upon 
the  specie  reserve),  the  Bank  of  Japan  was  allowed  at  the 
same  time  to  issue  bank  notes  to  the  maximum  limit  of  70 
million  yen  with  government  or  other  reliable  securities  or 
commercial  documents  as  a  guarantee.1  In  case  of  need  the 
bank  was  permitted  to  increase  the  bank  notes  according  to 
the  market  conditions,  and  to  issue  notes  with  the  foregoing 
securities  as  a  guarantee  by  paying  to  the  government  a  tax 
on  the  issue  at  a  rate  of  over  5  per  cent  per  annum  <>n  the 
amount  of  the  issue,  after  the  permit  of  the  Minister  of 
Finance  had  been  obtained.2  This  was  based  upon  a  lesson 
learnt  from  the  principle  of  indirect  restriction  (Konzinsen- 
tierung)  or  the  elasticity  method  of  note  issue  followed  by  the 
Imperial  Bank  of  Germany,  and  the  Bank  of  Japan  per- 
formed thereafter  an  important  service  .1-  .1  steadier  of  the 
money  market  and  the  supplier  of  capital.  Then,  on  March 
3,  1890,  for  the  first  time  there  was  300,000  yen  worth  of  the 
extra-limit  issue.  The  highest  amount  was  500,000  yen, 
between  March  10  and  April  1.  This  was  due  to  the  fact 
that  at  that  time,  owing  to  the  rise  in  the  price  of  rice,  the 

1  Of  this  amount,  27  million  yen  was  issued  gradually,  with  the  amount  of  the 
redempl  ion  ol  the  nal  tonal  bank  notes  since  January  1 .  1889,  .1-  the  limit. 
1  This  was  the  securitii  -  rea  rve  issue. 


[68        ECONOMIC    EFFECTS   OF   THE   SINO-JAPANESE   WAR 

adverse  balance  of  foreign  trade,  the  reactionary  influence  on 
the  rise  of  the  enterprising  spirit,  and  other  causes,  the  money 
market  showed  the  prevalence  of  abnormal  conditions.  But 
the  government  construed  this  fact  as  indicating  that  as  a  re- 
sult of  the  spirit  of  enterprise  which  had  sprung  up  since  1887, 
various  enterprises  would  develop  rapidly,  foreign  trade 
would  also  be  extended  and  the  demand  for  the  bank  notes 
in  circulation  in  the  economic  world  of  Japan  would  increase. 
So  at  length  by  Law  No.  34,  issued  May  16,  1890,  the  amount 
of  the  securities  reserve  issue  was  increased  from  70  million 
yen  to  85  million  yen.  This  was  the  opening  wedge  in  the 
extension  of  the  securities  reserve  issue,  which  we  are  to 
discuss  here.  The  government,  influenced  by  the  experience 
of  some  nine  years  thereafter,  ultimately  increased  the  amount 
to  120  million  yen.  Let  us  describe  the  actual  occurrences 
of  these  years. 

A  reaction  following  the  relaxing  of  the  money  market 
since  1 891  was  shown  in  the  latter  half  of  1893.  Foreign 
trade  showed  an  adverse  balance.  Furthermore,  on  the 
breaking  out  of  the  Sino- Japanese  War,  the  second  extra- 
limit  issue  took  place.  From  December  29,  1894  (3>272>721 
yen),  to  January  12,  1895,  the  highest  amount  was  4,197,549 
yen  at  the  end  of  December,  1894,  and  the  average  amount 
was  2,211,054  yen- 

In  April,  1895,  a  peace  treaty  with  China  was  formulated. 
But  owing  to  the  return  of  the  Liaotung  Peninsula  the  people 
of  Japan  were  downcast  and  the  economic  world  greatly 
depressed.  But  as  a  result  of  the  third  extra-limit  issue,  on 
May  28,  for  the  purpose  of  obtaining  a  loan  for  the  govern- 
ment, and  also  because  the  Bank  of  Japan  had  instituted  the 
policy  of  reviving  finances  by  lowering  the  interest  rate  on 
loans,  this  extra-limit  issue  was  continued  from  the  end  of 
May,  1905  (i,993,433  yen),  to  May  19,  1906;  at  the  end  of  1905 
the  amount  reached  55,083,147  yen,  the  average  amount 
throughout  this  period  being  29,100,731  yen.  This  was  an 
enormous  amount,  indeed.  As  the  extra-limit  issue  of  that 
time  was  due  to  the  loans  by  the  government,  when  the  regu- 


EFFECTS   ON   THE   MONEY   MARKET 


169 


lations  as  to  the  disposal  of  deposits  of  the  indemnity  were 
established  in  May,  1896,  this  extra-limit  issue  was  discon- 
tinued. Then,  in  the  latter  half  of  1897,  the  reaction  from 
the  postbellum  spirit  of  enterprise,  the  rise  in  the  prices  of 
commodities,  and  the  adverse  balance  of  foreign  trade  became 
both  causes  and  effects  in  themselves,  so  that  from  July  24, 
1893  (455,306  yen)  until  September  14,  1898,  extra-limit  issues 
were  sent  out  four  times,  with  a  maximum  amount  of  47,312,- 
657  yen  at  the  end  of  1897,  and  an  average  of  25,044485  yen. 
The  reason  for  the  withdrawal  of  the  extra-limit  issue  was 
that  the  government  had  purchased  the  war  and  consolidat- 
ing bonds  from  April,  1898,  and  the  money  market  had  relaxed, 
and  also  that  the  government,  in  order  to  pay  for  the  purchase 
of  the  bonds  with  the  money  borrowed  on  the  indemnity  de- 
posits, had  returned  the  convertible  notes  of  the  extra-limit 
issue  which  had  been  borrowed  from  the  Bank  of  Japan.  In 
short,  the  extra-limit  issue  of  the  securities  reserve  was  trans- 
formed apparently  into  the  specie  reserve  convertible  notes. 
But  from  October  26,  1898,  especially  from  December  16, 
until  February  21,  1899,  an  extra-limit  issue  of  notes  was 
again  sent  forth  several  times  in  succession,  with  a  maximum 
amount  of  24,016,568  yen  at  the  end  of  December,  1898,  and 
an  average  of  3,287,195  yen  on  the  first  occasion  (from  October 
26  to  November  7),  1,454,144  yen  on  the  second  occasion 
(from  November  27  to  December  1),  and  8,254,165  yen  on 
the  last  occasion  (from  December  16  to  February  21,  1899). 
We  shall  briefly  present  below  the  average  and  the  maximum 
amounts  of  extra-limit  issues  since  the  securities  reserve  issue 
was  increased  to  85  million  yen: 


1  titration 

Average 

Maximum 

Dec   29    1894— [an    12    1895 

Yen 

22,11 1,054 
29,100,731 

25.044.4 
3.287,195 

1.45L'  tt 
:  ,165 

Yen 

4.10; 

May  31    1895-May  19    1896 

55.083,147 

July  24   1897— Sept    14   1898 

47.312,65; 

Oct   26   1 898-Nov   7    1 898 

8,110,818 

Nov  27    1898-Dec    1    1898 

1,667 

Dec   16   1 898— I*  i-1  >   21    1899 

24,016.- 

14,875,296 

170        ECONOMIC    EFFECTS   OF   THE   SINO-JAPANESE   WAR 

That  the  actual  results  of  the  extra-limit  issue  were  as 
described  above  is  proved  by  the  fact  that  the  government 
and  people  of  Japan  raised  the  amount  of  the  legal  guar- 
antee reserve  issue  from  85  million  yen  to  120  million  yen. 

The  relation  between  the  amount  of  the  legal  guarantee 
reserve  issue  and  the  demand  for  capital  by  the  financiers  of 
any  nation  is  so  well  known  to  economists  that  there  is  no 
use  of  enlarging  upon  it  here.  But  if  we  reflect  a  little  we 
shall  see  that  the  extra-limit  issue  only  signifies  that  the 
amount  of  the  bank  note  issue  has  exceeded  the  limit  estab- 
lished by  law,  whereas  the  so-called  legal  limit  is  not  the  limit 
of  the  first  instance,  but  one  based  upon  a  fluctuating  specie 
reserve  issue.  Hence  it  is  not  proper  to  judge  the  demand  for 
capital  in  the  economic  circles  of  a  country  by  this  fact 
alone.  We  should  observe  also  the  specie,  the  guarantee 
reserve  issue,  and  the  total  amount  of  the  issue.  Then, 
again,  the  legal  extension  of  the  amount  of  guarantee  reserve 
issue  permitted  has  given  the  Bank  of  Japan  considerable 
power  to  supply  capital,  and  as  she  would  not  be  likely  to 
neglect  this  opportunity  to  benefit  herself,  and  as  the  eco- 
nomic world  would  eagerly  appropriate  this  supply  of  cheap 
money,  the  currency  in  circulation  would  greatly  increase 
and  its  effect  upon  general  economic  conditions  in  the  country 
would  not  be  slight.  Accordingly,  the  discussion  of  the  pro- 
priety of  extending  the  issue  would  be  a  link  in  the  discus- 
sion of  post-bellum  economy. 

Table  II  at  the  end  of  this  chapter1  shows  the  amount  of 
bank  note  issues  since  1894,  when  the  extra-limit  issue  first 
appeared,  and  Table  III2  shows  the  increase  and  decrease 
compared  with  1893. 

As  shown  in  the  foregoing  tables,  the  bank  note  issues 
rapidly  increased  during  this  time.  But  there  is  one  thing  to 
be  noted,  namely,  that  during  the  foregoing  period  the  con- 
vertible notes  of  the  Bank  of  Japan  were  not  the  only  paper 
currency  issued.  So  we  must  consider  the  entire  volume  of 
paper  currency  in  circulation  during  this  period. 

1  Post,  p.  197.  *  Post,  p.  198. 


EFFECTS    OX    THE    MONEY    MARKET 
Paper  Money  in  Circulation,  i 893-1 899 


171 


At  end  of  year 


1893 

1894 

189s 

1896 

1897 

1898 

1899  (Feb.) 
1899  (Dec.) 

Total.  . . 


Government 
notes 


Yen 

16,407,000 
13.404.547 
11,129,224 
9.376,172 
7,451,09s 
5,411.726 
5.293.724 
4.125.783 


72,599.274 


National 
bank  notes 


Yen 

22,756,119 
21.781,797 

20,796,786 
16,497.889 

1.866,563 
1,684,065 


90.407. 94S 


Convertible 

notes  of  Bank  of 

Japan 


Yen 
148,663.128 
149.813.700 
180,336,815 
198.313.896 
226,319.058 
I97.399.90i 
181,218,176 
250.562,040 


1.532,626.714 


Total 


Amount 


Comparison 
with  1893 


Yen 
187.826.247 
185,000,044 
212,262,825 
224.i87.9S7 
238.794.885 
204,678,100 
188,195.965 
254.687.823 


1.695.633.936 


100.  o 
98. 5 
113  o 
H9-4 
127  . 1 
109.0 
100.2 
I3S  6 


From  the  foregoing  tables,  it  will  be  seen  that  while  the 
increase  in  the  notes  issued  by  the  Bank  of  Japan  was  great, 
yet  these  notes,  except  when  required  by  the  natural  demands 
of  the  economic  world,  were  issued  to  replace  the  government 
notes  and  bank  notes  which  were  in  process  of  gradual  ad- 
justment or  extinction,  and  that  in  reality  the  total  volume  of 
the  paper  currency  rose  and  fell  in  turn  without  showing  any 
very  great  permanent  increase. 

Moreover,  the  extra-limit  issue  of  the  convertible  notes  of 
the  Bank  of  Japan  was  effected  in  many  instances  when  there 
was  a  decrease  in  specie. 

The  extra-limit  issues  of  May,  1895,  and  July,  1897.  both 
coincided  with  the  decrease  in  the  specie  reserve.  But  in 
financial  circles  there  was  always  need  of  a  certain  fixed 
amount  of  convertible  notes.  In  case  the  amount  of  the 
issue  of  convertible  notes  fell  below  what  was  necessary,  be- 
cause of  a  decrease  in  the  specie  reserve,  it  may  naturally  be 
inferred  that  by  some  other  method  the  guarantee  reserve 
issue,  for  instance— the  deficiency  would  be  met,  and 
that  the  cause  of  the  increase  on  the  guarantee  reserve  issue 
lay,  aside  from  the  government  loans,  in  the  increase  in  in- 
dustrial loans  made  to  the  people  generally.  That  the  loans 
made  by  the  Bank  of  Japan  increased  extraordinarily  is 
shown  in  Table  IV  at  the  cud  of  this  chapter.1 

1  Post,  p.   I 


172        ECONOMIC    EFFECTS   OF   THE   SINO-JAPANESE   WAR 
Extra-Limit  Issues  of  Convertible  Notes 


At  end  of 


Specie 
reserve 


Decrease 

compared 

with  month's 

end,  from 

standard 


Bank  note 
issue 


Extradimit 
issue 


1895 

April 

May 

(June-Nov.  omitted) 
Dec 

1896 

Jan 

Feb 

March 

April 

May 

(June-Dec.  omitted) 

1897 
(J  an. -May  omitted) 

June 

July 

(Aug.-Nov.  omitted) 
Dec 

1898 

Jan 

Feb 

Mar 

(April-July  omitted) 

Aug 

Sept 

Oct 

Nov 

Dec 


Yen 
68,532,320 
66,199,000 

60,370,797 


54,890,176 
54,589,146 
55.347.oo2 

55.574.499 
106,308,649 


119,437,064 
109,780,678 

98,261,473 


91,568,364 
83,626,224 
74,651,152 

88,498,228 
91,307,480 
88,468,720 
90,180,017 
89.570,239 


Standard 
2,333,320 

8,161,523 

13,642,144 

13,943,174 
13,185,318 
12,957,821 
37,776,329a 


Standard 
9,656,386 

21,175,591 

27,868,700 
35,810,840 
44,785,912 

30,938,836 
28,129,584 
30,968,344 
29,257,047 
29,866,825 


Yen 
132,839,984 
132,573,715 

180,336,815 


171,211,604 
164,408,373 
157,141,819 
154,748,631 
165,837,762 


195,302,669 
198,728,088 

226,229,058 


212,003,989 
195,297,483 
195,889,761 

186,361,320 
174,472,809 
180,122,704 
177,581,079 
197,399,901 


Yen 

1,993,433 
55,083,148 

50,937,636 
44,434,259 
36,409,048 
33,786,956 


10,325,196 
47,312,657 

39,529,488 
30,626,515 
39.658,322 

14,681,165 

8,110,818 

3,677,028 

24,016,569 


a  Increase. 


The  origin  of  the  extra-limit  issue  and  the  increase  in  loans 
being  as  just  stated,  we  see  that  the  government  considered 
the  limit  of  the  guarantee  reserve  issue  too  small;  especially 
since,  owing  to  the  stringency  of  the  money  market  at  that 
time,  commercial  and  industrial  circles  desired  the  legal 
limit  of  the  issue  to  be  extended  and  the  powers  of  the  Bank  of 
Japan  to  be  increased.  Moved  by  this  request,  the  govern- 
ment extended  the  legal  limit  by  Law  No.  55,  issued  March  9, 
1898,  and  applied  15  million  yen  out  of  the  35  million  yen 
increase  to  the  relief  of  the  domestic  money  market,  thereby 


EFFECTS    OX    THE    MONEY   MARKET  1 73 

opening  the  way  for  high-class  exchange  transactions,  the 
discounting  of  checks,  and  an  increase  in  branch  banks.  At 
the  same  time,  20  million  yen  were  applied  to  relieve  the 
stringency  of  the  money  market  and  facilitate  transactions 
with  Europe,  America  and  the  Orient.  The  Yokohama 
Specie  Bank  was  ordered  to  engage  in  the  work  of  facilitating 
the  China  trade  especially. 

But  we  believe  it  was  a  mistake,  in  view  of  existing  condi- 
tions at  that  time,  to  extend  the  legal  limit  of  the  guarantee 
reserve  issue  merely  because  of  the  frequency  of  extra-limit 
issues,  without  first  investigating  what  the  reason  was  for  the 
increase  in  convertible  notes.  We  do  not  mean  to  argue  at 
length  as  to  the  merit  of  the  policy  here.  We  only  wish  to 
make  it  clear  how  this  procedure  disturbed  the  money  market 
after  the  war  and  created  an  unfavorable  effect  upon  the 
national  finances.  For  even  if  the  amount  of  the  guarantee 
reserve  issue  had  been  determined  by  law,  it  would  not  have 
bound  economic  circles;  and  even  if  the  issue  of  notes  should 
go  beyond  the  legal  limit,  it  would  not  menace  the  financial 
interests,  so  that  the  extension  of  the  legal  limit  by  35  million 
yen  as  mentioned  above  had  no  practical  significance  at  all. 
But  the  extension  of  the  amount  of  issue  exempted  from 
taxation  allowed  the  Bank  of  Japan  has  given  that  bank 
great  power  to  furnish  capital — such  that  if  this  power  were 
employed  wrongfully,  bank  notes  would  be  al  a  premium  and 
this  would  have  serious  effects  upon  finance.  Then,  again, 
our  financiers  and  economists,  drunk  with  tin  ulnry  <>i"  vietory 
after  the  Sino-Japane>e  War,  were  aboul  to  make  great 
strides  ahead  when  Japan  was  obliged  t<>  return  the  Liaotung 
Peninsula.  The  people  suddenly  bee, mie  pessimistic.  So 
the  government  adopted  .1  liberal  policy  and  ordered  the 
Bank  of  Japan  to  lower  the  rate  <>t'  interest.1  This  was  done 
in  order  to  en<  ourage  the  people,  so  that  optimism  might  be 
gradually  restored  and  the  people  realize  that  they  need  no 
longer  remain  depressed.     They  accordingly   took   courage 

1  At  that  time  the  discount  rate  was  ^  sen  1  tin  per  diem,  that  is  7.665  per  cent, 
which  was  changed  to  I  sen  9  nn  per  diem,  thai  is  6  935  per  cent. 


IJ4       ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 

and  became  enthusiastic  over  post-bellum  enterprises;  the 
demand  for  capital  for  army  and  naval  expansion  and  for  the 
prosecution  of  said  enterprises  increased  enormously,  and 
finally  a  great  financial  panic  occurred,  as  is  mentioned 
later. 

Thus  the  sudden  increase  in  capital  after  the  war  was  due 
partly  to  the  need  of  the  government,  but  not  a  little  to  the 
deliberate  policy  of  the  government  and  the  Central  Bank. 
Consequently,  the  development  of  a  sudden  demand  for 
capital  as  described  heretofore  can  not  be  considered  the 
result  of  a  healthy  development,  or  a  natural  evolution  in  the 
economic  life  of  the  people ;  for  in  economic  development  there 
are  true  and  false  tendencies.  That  financial  circles  which 
have  shown  a  tendency  to  great  activity  should  suddenly 
shrink  from  advancing  is  a  phenomenon  to  be  observed  only 
in  a  period  of  speculation  and  vainglory.  The  conditions  in 
the  financial  circles  of  our  country  after  the  Sino-  Japanese  War 
were  indeed  such.  Judged  from  these  facts,  the  arguments 
advanced  in  favor  of  extending  the  amount  of  the  guarantee 
reserve  issue  based  upon  the  phenomena  resulting  from  this 
false  tendency  may  be  considered  as  castles  in  the  air,  with 
great  instability  of  foundation.  They  can  not  escape  the 
criticism  of  inconsistency. 

As  has  been  said,  the  extension  of  the  amount  of  the  guar- 
antee reserve  issue  can  not  properly  be  considered  necessary, 
judging  from  the  point  of  view  of  a  dispassionate  critic.  On 
the  contrary  it  poured  oil  on  the  prairie  fire  of  the  false 
phenomena  of  financial  circles  in  order  to  cause  an  increase  in 
the  issue  of  convertible  notes  and  may  be  considered  as  one 
cause  of  unsteady ing  the  money  market.  If  we  remember 
that  the  so-called  extension  of  the  issue  by  35  million  yen  is 
22  per  cent  of  158,517,000,000  yen,  which  was  the  average 
amount  of  the  issue  between  1893  and  1898,  it  is  not  difficult 
to  see  how  great  the  effect  must  have  been. 

Before  closing  this  section  we  would  call  attention  to  Table 
V  at  the  end  of  this  chapter,  which  shows  the  amount  of  the 
issue  at  the  end  of  each  year  since  1899. 


effects  on  the  money  market  i  j  5 

Increase  of  Monetary  Facilities 

Necessitated  by  the  national  development  after  the  Sino- 
Japanese  War,  the  increase  and  reform  of  monetary  facilities 
were  planned  by  the  government.  In  the  first  place  the 
business  of  the  Bank  of  Japan  and  of  the  Yokohama  Specie 
Bank  was  enlarged,  the  Hypothec  Bank  and  the  Bank  of 
Agriculture  and  Commerce  were  established,  and  in  addition 
industrial  banks  and  the  Bank  of  Formosa  were  newly  es- 
tablished, in  order  to  meet  the  needs  of  the  time;  and,  secondly, 
a  wise  disposition  of  the  national  banks  was  made  and  the 
causes  of  economic  troubles  were  removed.  The  ordinary 
monetary  institutions  of  Japan  had  been  largely  reorganized 
before  the  Sino-Japanese  War;  i.e.,  on  July  I,  1893,  a  com- 
mercial statute  was  put  into  force  followed  by  banking 
regulations1  and  savings  bank  regulations,2  and  thus  the  bank- 
ing business,  which  had  been  under  imperfect  control  be- 
fore, now  entered  upon  a  new  era  of  development.  Numer- 
ous banks  were  established  at  this  time.  But  the  Bank  of 
Japan  and  the  Yokohama  Specie  Bank,  national  banks 
authorized  with  the  power  to  issue  notes  and  a  few  private 
banks  and  savings  banks  may  be  especially  mentioned. 
Consequently,  facilities  for  supplying  capital  for  commercial 
purposes  seem  to  have  been  rather  general  throughout  the 
country.  But  the  banks  for  realties  and  securities  had  not  yet 
been  established.  As  for  facilities  for  agriculture  and  in- 
dustry, there  was  also  a  gnat  lack  here. 

Consequently  the  government  made  endeavors  t<>  impr 
monetary  facilities,  and  thus  meet  the  metis  of  the  time.  For 
example,  the  Hypothec  Bank  of  Japan,  the  Bank  of  Agri- 
culture and  Industry,  and  the  Colonial  Bank  of  Hokkaido 
were  established  for  real  property,  the  Industrial  Bank  of 
Japan  for  securities  and  the  Bank  of  Formosa  to  meet  the 
needs  in  the  newly  acquired  territory  of  Formosa.  As  to  the 
Bank  of  Japan  and  the  Yokohama  Specie  Bank,  the  govern- 
ment,   in   order   to    increase   their   usefulness   after  the  war, 

1  Law  No.  72,  August,  1890.  » Law  No.  33,  August,  1890. 


\-J()       ECONOMIC    EFFECTS   OF   THE   SINO-JAPANESE   WAR 

allowed  them  either  to  increase  their  capital  or  to  increase  the 
amount  of  the  securities  reserve  issue,1  thereby  increasing  the 
loaning  power  of  the  banks  so  that  they  might  contribute 
toward  the  betterment  of  finances  after  the  war. 

The  following  record  will  enumerate  the  various  advance 
steps  made  at  this  time: 

(i)  The  Bank  of  Japan  increased  her  capital  by  10  million 
yen  in  August,  1895,  thus  raising  her  authorized  capital  from 
20  million  yen  to  30  million  yen. 

(2)  The  Yokohama  Specie  Bank  increased  her  capital  by  6 
million  yen  in  March,  1896,  thus  raising  her  authorized  capital 
from  6  million  yen  to  12  million  yen. 

(3)  The  Hypothec  Bank  of  Japan  (the  bank  dealing  with 
real  property)  opened  her  doors  in  August,  1897. 

(4)  In  each  prefecture  a  bank  of  agriculture  and  industry 
was  established  between  February,  1898,  and  August,  1900, 
— forty-six  banks  in  all. 

(5)  The  national  banks  (153  in  number)  became  private 
banks  in  February,  1899,  and  the  circulation  of  national 
bank  notes  was  prohibited  from  December  9  of  the  same  year. 

(6)  The  Bank  of  Japan  was  permitted  to  increase  the 
amount  of  her  securities  reserve  issue  in  March,  1899,  by  35 
million  yen,  making  the  total  120  million  yen.2 

(7)  The  Yokohama  Specie  Bank  increased  her  capital  in 
September,  1899,  by  120  million  yen,  making  her  authorized 
capital  24  million  yen. 

(8)  The  Bank  of  Formosa  was  opened  September,   1903. 

(9)  The  Colonial  Bank  of  Hokkaido  was  opened  April,  1900. 

(10)  The  Industrial  Bank  of  Japan  was  opened  April,  1902. 
For  several  years  after  the  war,  a  period  of  reform  ensued 

as  regarded  monetary  institutions.  The  money  market, 
which  had  already  been  adjusted  to  conditions  before  the  war, 
had  now  to  be  steadied  by  the  aid  of  special  banks  operated 
in  all  directions,  so  that  no  more  complaints  might  be  raised 
about  the  lack  of  financial  facilities.     In  short,  the  ten  years 

1  By  Law  No.  55,  March  9,  1899,  the  amount  was  increased  from  85  million  yen 
to  120  million  yen  as  before  described. 

2  Cf.  section  on  expansion  of  issue  capacity  of  convertible  notes,  p.  166. 


EFFECTS    ON   THE   MONEY    MARKET 


/  / 


after  the  Sino-Japanese  War  might  be  designated  as  the 
period  for  perfecting  financial  facilities.  The  steady  na- 
tional development  after  the  war  and  the  solid  as  well  as 
remarkable  achievements  of  national  finance  may  be  said  to 
have  been  due  largely  to  the  financial  policy  of  the  govern- 
ment. Of  the  financial  policies  mentioned  above,  we  have 
already  dealt  with  one  in  detail,  viz.,  the  extension  of  the 
securities  reserve  issue  (in  the  section  on  expansion  of  issue 
capacity  of  convertible  notes).  We  shall  now  take  up  the 
remaining  subjects. 

The  Yokohama  Specie  Bank 

The  Yokohama  Specie  Bank,  at  the  end  of  1893,  that  is,  the 
year  previous  to  the  Sino-Japanese  War,  had  an  authorized 
capital  amounting  to  6  million  yen  (with  a  paid-up  capital 
of  4,500,000  yen).  But  after  the  war  her  business  gradually 
increased.  Since  February,  1896,  the  London  branch  of  the 
bank  acted  as  agent  for  the  Bank  of  Japan,  by  taking  charge 
of  the  indemnity  received  from  China  and  disposing  of  it. 
On  July  1,  1895,  the  Shanghai  agency  of  the  bank,  which  had 
been  closed  owing  to  the  Sino-Japanese  War,  was  reopened. 
On  September  15,  1896,  an  agency  was  opened  at  British 
Hongkong.  Furthermore,  in  July,  1894,  increased  capital 
was  required  by  the  bank  with  a  view  to  opening  an  agency  at 
Bombay,  India.  So,  on  March  25,  1896,  the  authorized 
capital  was  increased  to  12  million  yen.  In  September,  1899, 
this  amount  was  doubled,  thus  becoming  24  million  yen.  A 
branch  was  established  at  Tientsin  (August,  1899),  at  .Wu- 
chang (August,  1900),  and  at  Peking  (January,  1902),  thus 
extending  the  sphere  of  activity  in  China.  A  further  advance 
was  made  in  September,  1901,  when  the  by-laws  of  the  bank 
were  revised  so  that,  in  ease  business  transactions  abroad 
required  it,  the  various  branches  and  agents  would  have 
power  to  issue  notes  payable  on  sight.  In  November,  1902, 
for  the  first  time,  such  drafts  were  issued  by  the  Tientsin 
branch  of  the  bank;  in  December,  by  the  Shanghai  branch;  in 
January,  1903,  by  the  Neuchang  branch; and  in  March  by  the 


I78        ECONOMIC   EFFECTS    OF    THE    SINO- JAPANESE    WAR 

Peking  branch.  The  conditions  of  loans  from  1893  showed  a 
sudden  development  about  1899,  as  will  be  seen  from  Table 
VI  at  the  end  of  this  chapter. 

Realty  banks 
Three  kinds  of  banks  were  established  to  deal  in  real  prop- 
erty, as  given  below: 


Name 

Law 

governing 

No. 

Authorized 
capital 

Paid-up  capital 
at  time  of  es- 
tablishment 

Opening 

Hypothec  Bank 
of  Japan .... 

Hank  of  Agri- 
culture and 
Industry  .  .  . 

Colonial     Bank 
of  Hokkaido. 

No.  82,  April 
20,   1896. . . 
Nos.  83  and 
84,  April  20, 
1896 

No.  76, 
March,  1899 

1 

46 
1 

Yen 
10,000,000 

28,370,000s 

3,000,000 

Yen 
2,500,000 

22,923,485b 

1,050,000 

Aug.  2,  1897 
First  on  Feb. 
I,   1898,  and 
last  on  Aug. 
17,  1900 

April  1,  1900 

Average  per  bank,  616,739  yen. 


b  Average  per  bank  498,337  yen. 


The  province  of  these  three  kinds  of  banks  was  lending 
money  for  long  terms  on  real  property  and  at  a  low  rate  of 
interest  (in  case  of  the  Colonial  Bank  of  Hokkaido,  agricul- 
tural products  or  shares  or  bonds  might  be  used  as  security 
in  place  of  real  property).  The  object  was  to  improve  and 
develop  agriculture  and  industry.  The  Hypothec  Bank  of 
Japan  was  established  in  Tokyo  as  the  central  bank  for  real 
property,  and  also  one  in  each  of  the  several  prefectures.1 
These  banks  were  to  cooperate  with  the  Hypothec  Bank  in 
order  to  supply  capital  for  agriculture  and  industry.  As  to 
the  province  of  the  Colonial  Bank  of  Hokkaido,  it  was  not 
fundamentally  different  from  that  of  the  Banks  of  Agriculture 
and  Industry,  but  whereas  (i)  the  shareholders  of  the  Banks 
of  Agriculture  and  Industry  were  confined  to  those  who  had 
their  residence  registered  and  were  actually  residing  in  the 
prefectures  in  which  the  banks  were  situated,  and  (2)  the 
amount  of  subsidy  from  the  government  was  limited  to  5  per 
cent  of  the  paid-up  capital  per  annum,  in  the  Hokkaido  Bank 

1  Fu  and  ken  "prefectures"  are  terms  designating  administrative  districts  and 
first-class  local  organizations,  and  their  number  is  46,  that  is,  3  fu  and  43  ken. 
The  differences  between  fu  and  ken  are  historical  rather  than  substantial. 


EFFECTS   ON   THE   MONEY    MARKET 


179 


these  regulations  were  not  and  could  not  be  enforced.  So,  in 
order  to  permit  special  regulations  for  this  bank  a  separate 
law  was  enacted.  The  amounts  expended  by  the  govern- 
ment as  subsidies  in  the  establishment  of  the  banks  for  real 
property,  as  mentioned  above,  are  as  follows: 

Government  Subsidies  to  Hanks 


Subsidy  to 

Subsidy  to  Banks 

Subsidy  to 

War 

Hypothec  Bank 

of  Agriculture  and 

Colonial  Bank 

Total 

of  Japan 

Industry' 

of  1  lokkaido 

Yen 

Yen 

Yen 

Yen 

1897 

55.052 

I,i38,320a 

1. 193.372 

1898 

30,010 

6,2i6,68oa 

6,246,690 

1899 

30,873 

688,620s 

250,000 

969.493 

1900 

1 55,000* 

250,000 

405,000 

1901 

5,000 

200,000 

205,000 

1902 

5,000 

200,000 

205,000 

1903 

5,000 

5.000 

Total 

U5-935 

8,213,620 

900,000 

9.229,555 

»  5,000  yen  each  year  (total  20,000  yen)  were  subsidies  to  the  Bank  of  Agriculture  and  Industry  in 
Okinawa  Prefecture  (Loochoo). 

Not  only  were  the  foregoing  amounts  actually  expended  as 
subsidies,  but  in  the  case  of  the  Banks  of  Agriculture  and 
Industry  and  the  Colonial  Bank  of  Hokkaido,  immunity  was 
given  from  paying  dividends  to  the  government  for  the  shares 
in  its  possession  for  a  certain  number  of  years.  These  arrange- 
ments helped  greatly  to  realize  the  object  of  the  subsidii 

The  establishment  of  bank--  dealing  with  real  property 
has  been  advocated  from  about  1882.  But  in  order  to 
perfect  this  plan  capital  for  long  terms  and  at  low  rates  of 
interest  was  needed.  At  that  time,  however,  the  general 
interest  rate  was  very  high.  Some  of  the  national  bonds  bore 
more  than  7  per  cent  interest,  so  that  it  was  not  possible  to 
secure  low-priced  capital.  Consequently,  it  was  a  matter  of 
the  utmost  difficulty  to  secure  by  mean--  of  bond  issues 
amounts  several  times  larger  than  the  capital  of  the  1  Links. 
Moreover,  the  value  of  land  as  security  was  very  low,  and 
the  circulation  of  money  was  not  yet  free;  further,  in  order  to 
realize  profits  from  agriculture,  a  longer  term  is  needed  for 


l80       ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 

loans  than  is  usually  allowed  by  commercial  banks.  This 
was  the  reason  why,  although  financial  institutions  for  facil- 
itating commercial  transactions  had  been  developed,  banks  for 
real  property  had  not  yet  been  established;  thus  the  capital 
needed  for  agriculture  and  industry  was  lacking,  and  conse- 
quently their  full  development  could  not  readily  be  effected. 
But  the  tendency  in  the  money  market  was  toward  a 
gradual  fall  in  the  interest  rate.  In  addition,  the  price  of 
bonds  rose.  With  the  promulgation  of  the  law  concerning 
consolidated  bonds  in  1886,  bonds  bearing  high  interest 
disappeared  and  the  price  of  bonds  showed  signs  of  a  steady 
rise.  Thus  a  favorable  opportunity  for  establishing  banks  for 
real  property  had  come.  When  the  Bank  of  Japan  lowered 
the  rate  of  interest  after  the  Sino-Japanese  War,  the  prices  of 
securities  rose.  On  account  of  anxiety  as  to  the  inflow  of  the 
indemnity  the  interest  rate  was  lowered,  bonds  and  shares 
rose  in  price,  and  the  proposal  to  issue  bonds  to  secure  capital 
to  be  loaned  by  the  banks  for  real  property  was  received  with 
great  favor.  At  last  the  laws  governing  the  Hypothec  Bank 
of  Japan  and  the  Banks  of  Agriculture  and  Industry  were 
promulgated.  We  shall  now  briefly  explain  the  method  of 
organization. 

(A)  The  Hypothec  Bank  of  Japan  and  the  Banks  of  Agri- 
culture and  Industry  were  closely  related  to  each  other.  Both 
aimed  at  loaning  capital  for  the  improvement  and  develop- 
ment of  agriculture  and  industry,  with  real  property  as 
security.  The  difference  between  the  two  was  only  that  of 
size  and  position;  that  is,  the  Hypothec  Bank  was  the  central 
bank,  while  local  Banks  of  Agriculture  and  Industry  were 
established  in  the  different  prefectures.  The  Hypothec  Bank 
lent  capital  to  the  Banks  of  Agriculture  and  Industry  by 
taking  the  bonds  issued  by  the  latter  banks.  The  Banks  of 
Agriculture  and  Industry  acted  as  agents  for  the  Hypothec 
Bank.  The  two  helped  each  other  in  supplying  capital  to 
agriculture  and  industry. 

(B)  The  capital  of  the  Hypothec  Bank  was  10,000,000  yen 
and  its  shares  were  valued  at  200  yen  each,   whereas  the 


EFFECTS   ON   THE   MONEY    MARKET  181 

capital  of  the  various  Banks  of  Agriculture  and  Industry 
was  not  more  than  200,000  yen  each,  and  their  shares  were 
valued  at  20  yen  each.  There  was  only  one  Hypothec  Bank 
established  in  Japan,  whereas  the  other  banks  were  numerous 
— one  in  each  prefecture— and  their  shareholders  were  re- 
quired to  have  their  residences  registered,  and  actually  to  live 
in  said  prefecture.1 

In  accordance  with  the  purpose  for  which  they  were  es- 
tablished, the  loans  were  made  with  real  property  as  security,2 
and  on  the  annual  instalment  system.  In  the  case  of  the 
Hypothec  Bank  these  were  fifty-year,  and  in  the  case  of  other 
banks,  thirty-year  instalments.  In  addition,  loans  might  be 
made  on  a  system  of  regular  instalments  for  five  years,  the 
limit  being  one-tenth  of  the  amount  mentioned  above  (Hy- 
pothec Bank)  or  one-fifth  (Banks  of  Agriculture  and  Industry). 

(C)  The  capital  was  represented  principally  by  the  capital 
of  each  bank,  but  the  most  important  matter  to  be  considered 
was  the  issue  of  bonds. 

When  one-fourth  or  more  of  the  capital  was  paid  up,  the 
Hypothec  Bank  might  issue  bonds  to  within  ten  times  the 
paid-up  capital  and  not  exceeding  the  amount  of  the  loans 
payable  by  annual  instalments  and  the  amount  of  the  accepted 
bonds  of  the  Banks  of  Agriculture  and  Industry,  while  the 
Banks  of  Agriculture  and  Industry  might  issue  bonds  to  within 
five  times  the  paid-up  capital  and  not  exceeding  the  loans  by 
annual  instalments  minus  the  amount  borrowed  from  the 
Hypothec  Bank.  The  bonds  were  valued  at  10  yen  and  up- 
ward with  premium  in  the  case  of  the  Hypothec  Bank,  and  at 
5  yen  and  upward  in  the  ease  of  the  Banks  of  Agriculture 
and  Industry.  The  reason  why  the  value-  were  fixed  so  low 
was  because  thus  the  banks  might  be  able  to  gather  in  -mall 
amounts  as  capital. 

(D)  These  two  kinds  of  banks  were  under  the  control  of 
the  Minister  of  Finance.     In  case  the  dividends  of  the  Hy- 

1  The  registry  ..i"  residence  means  registry  in  the  locality  where  is  kept  the  book 

ristry  hi'  the  family  <>i"  which  one  is  a  member. 
1  Public  corporations  were  exempted  from  furnishing  this  security. 


[82        ECONOMIC    EFFECTS   OF   THE   SINO-JAPANESE    WAR 

pothec  Bank  should  fall  below  5  per  cent,  the  Bank  was  to 
receive  a  subsidy  for  ten  years  from  the  time  of  its  establish- 
ment. In  the  case  of  the  Banks  of  Agriculture  and  Industry 
the  various  prefectures,  in  accordance  with  the  law  of  subsidy 
to  the  Banks  of  Agriculture  and  Industry1  were  to  be  allowed 
to  have  capital  to  invest  in  the  shares  of  the  Banks  to  the 
limit  of  70  yen  per  hundred  cho  of  taxable  land,  not  in- 
cluding house  lots,  mineral-water  sites,  or  swamp  grounds  of 
the  various  prefectures;  also  to  the  limit  of  a  total  of  300,000 
yen  per  prefecture  and  not  exceeding  one-third  of  the  paid-up 
capital.  Further,  from  the  time  of  the  establishment  of  the 
banks  it  was  arranged  that  no  dividends  should  be  required 
for  ten  years  for  the  shares  subscribed  by  the  prefectural  gov- 
ernments, and  for  5  years  more  the  dividends  should  be  in- 
cluded in  the  reserve  fund.  We  shall  explain  later  about  the 
amount  supplied. 

In  this  way,  middle-class  farmers  and  industrialists  who 
had  been  inconvenienced  by  the  high  rates  of  interest  uni- 
versally prevalent  gained  relief. 

In  accordance  with  the  foregoing  system,  the  Hypothec 
Bank  was  established  in  June,  1897,  with  a  capital  of  10 
million  yen  and  a  paid-up  capital  of  2\  million  yen.  The 
doors  of  the  Hypothec  Bank  were  opened  August  2,  1897. 

A  Bank  of  Agriculture  and  Industry  was  established  in 
each  prefecture,  the  first  being  the  one  in  Tokyo  prefecture 
established  on  December  28,  1897,  and  the  last  being  the  one 
established  in  Tokushima  prefecture  on  August  9,  1900 — 
forty-six  in  all.  At  the  end  of  December,  1900,  the  year  in 
which  the  establishment  of  the  Banks  of  Agriculture  and 
Industry  was  completed,  the  total  amount  of  authorized 
capital  was  28,370,000  yen,  and  the  total  paid-up  capital  22,- 
923,485  yen,  of  which  8,178,620  yen  was  the  amount  of  the 
government  subsidy,  in  accordance  with  the  law  of  subsidy, 
to  the  Banks  of  Agriculture  and  Industry.  At  the  time  of 
their  establishment,  it  happened  that  the  money  market  was 
tight  and  there  was  a  great  demand  for  capital.     So  loans 

1  Law  No.  84,  April  20,  1896. 


EFFECTS    OX    Till-    MONEY    MARKET 


183 


were  steadily  made  and  a  great  service  was  thn^  rendered 
agriculture  and  industry  by  these  banks.  In  the  case  of  the 
Hypothec  Bank,  between  1898  and  1903  the  total  amount  of 
bonds  issued  was  72,557,820  yen.  At  the  end  of  each  year 
the  amounts  loaned  dwindled,  according  to  the  nature  of  the 
loan,  some  being  repaid  in  annual  instalments,  some  at  regular 
periods.     The  figures  are  as  follows: 

Outstanding  Loans  for  Various  Purposes  at  End  of  Each  Year,  1897-1903 


Year 

Agriculture 

Industry 

Public 
corporations" 

Public 
associations1" 

Total 

Yen 

Yen 

Yen 

Yen 

Yen 

1897 

342,709 

816,600 

10,000 

206,703 

I,376,oi2 

1898 

1,426,257 

4.477.939 

313.593 

488,945 

6,706,734 

1899 

2,328,762 

4,886,682 

539.425 

i,oi9,973 

8,774.842 

1 900 

3.477.737 

5.873.213 

1,075.883 

1,223,798 

11,650,631 

1901 

4,565,202 

6,451.573 

1,601,883 

1,429,920 

14,048,578 

1 902 

6,348,882 

7.559.603 

1,780,858 

1,609,659 

17,320,102° 

1903 

8,544,907 

7,982,041 

3,044,512 

1,940,674 

2i,795,394d 

»  Includes  loans  to  prefectures,  counties,  cities,  towns  and  villages. 

1  Includes  loans  to  water  improvement  guilds,  earth-work  guilds  and  arable  land  adjustment 
guilds. 

•  Includes  21,100  yen,  loans  of  the  Banks  of  Agriculture  and  Industry. 
d  Includes  283,260  yen,  loans  of  the  Banks  of  Agriculture  and  Industry. 

The  amounts  of  the  bonds  of  the  Banks  of  Agriculture  and 
Industry  taken  over  were  not  included  in  the  foregoing  tabic 
They  were  as  follows: 


Year 


1899 

1900 
1901 
1902 
1903 


Face  value 


Yen 
142,280 
1 75,580 

239.390 
442,610 


Price 


Yen 

137.344 
170,644 

234.454 

KJ7.799 
565,401 


Now,  by  examining  the  Banks  of  Agriculture  and  Industry, 
we  find  the  amounts  of  the  bonds  of  those  banks  reached 
7,033,430  yen  between  1899  and  1903,  and  the  amounts  of  the 
loans,  those  redeemable  by  annual  instalments  and  those 
redeemable  at  regular  periods,  are  shown  in  Table  VII  at  the 
end  of  this  chapter.1 

1  Post,  p.   202. 


[84       ECONOMIC   EFFECTS   OF   THE   SINO-JAPANESE   WAR 

Again,  in  order  to  show  the  power  of  the  banks  to  do  busi- 
ness in  spite  of  the  figures,  two  additional  tables  VIII  and 
IX  have  been  inserted  at  the  end  of  this  chapter.1 

Let  us  consider  next  the  Colonial  Bank  of  Hokkaido.  Its 
purpose  was  the  same  as  that  of  the  Banks  of  Agriculture  and 
Industry  of  the  various  prefectures,  but  Hokkaido  was  dif- 
ferent from  other  parts  of  the  country  in  that  the  circulation 
of  money  was  not  yet  sufficient,  and  in  consequence  the 
interest  rate  was  very  high.  It  was  not  easy,  therefore,  to 
establish  a  bank  with  qualifications  as  to  shareholders,  profits 
and  subsidy  the  same  as  for  the  Banks  of  Agriculture  and 
Industry.  So  the  sphere  of  activity  of  this  bank  was  made  a 
little  broader,  and  as  we  have  briefly  explained  before,  a 
special  law  was  framed  to  permit  a  special  kind  of  subsidy  for 
it.  The  authorized  capital  was  3  million,  yen  of  which  1 
million  yen  was  furnished  by  the  government,  and  on  the 
government  shares  no  dividends  were  required  for  ten  years 
after  the  last  day  of  the  first  period  of  the  establishment. 
The  business  of  the  bank  was  begun  on  April  1,  1900,  with  a 
paid-up  capital  of  750,000  yen. 

Although  the  sphere  of  activity  of  this  bank  was  in  the 
main  the  same  as  that  of  the  other  Banks  of  Agriculture  and 
Industry,  yet  there  were  some  differences.  For  example, 
as  this  bank  was  not  only  to  loan  money  on  the  security  of  real 
property,  but  also  to  furnish  capital  for  the  development  of 
the  land  of  Hokkaido,  loans  were  made  with  agricultural 
products,  shares  and  bonds  as  security,  bonds  were  subsidized, 
and  the  business  of  handling  deposits  and  drafts  was  under- 
taken; in  short  the  sphere  of  activity  was  somewhat  broader 
than  that  of  the  Banks  of  Agriculture  and  Industry.  Funds 
for  the  business  were  obtained,  in  addition  to  the  bank's 
capital,  by  issuing  bonds  (colonial  bank  bonds)  to  the  limit  of 
five  times  the  paid-up  capital. 

The  actual  business  condition  of  the  bank  is  shown  by  the 
following  table  of  loans  made: 

1  Post,  pp.  203-205. 


EFFECTS   ON   THE   MONEY    MARKET 
Loans  of  Colonial  Bank  of  Hokkaido 


Year 

To  Agriculture  and  industry 

To 
Industry 

To  Com- 
merce 

To  public 
institutions 

Total 

1900 

Instalment 
Regular  period 

Total 

Yen 

492,786 
36,840 

Yen 

82,821 

Yen 
30,000 

Yen 

12,620 

3-500 

Yen 

618,227 
40,340 

529,626 

82,821 

30,000 

16,120 

658,567 

1901 

Instalment 
Regular  period 

Total 

Yen 

913.540 
221,200 

Yen 
126,921 
103,400 

Yen 
25,183 
5.000 

Yen 

12,353 

Yen 

1,077.997 
329,600 

M34.740 

230,321 

30,183 

12,353 

1,407.597 

1902 

Instalment 
Regular  period 

Total 

Yen 
1,031,781 
247,460 

Yen 

152,014 
128,000 

Yen 
166,728 

Yen 
51,864 
40,000 

Yen 

1,402,387 
415,460 

1,279,241 

280,014 

166,728 

91,864 

1,817,847 

1903 

Instalment 
Regular  period 

Total 

Yen 
1,183,176 

427,741 

Yen 
109,706 
113,600 

Yen 

242,858 

80,700 

Yen 
40,223 
40,000 

Yen 

1,575.963 
662,041 

1,610,917 

224,306 

323.558 

80,223 

2,238,004 

As  for  the  capital  used  in  the  business  of  the  bank,  the 
colonial  bank  bonds  were  issued  until  1904.  The  rest  was  as 
follows : 


Paid-up 
capital 

Reserve 

Percentage 
of  dividends 

Loans 

Year 

Total  in 
year 

Balam 
end  of  year 

1900 

1901 

1902 

1903 

}'(  n 
1  ,(.50,00(1 
2,098,406 
2,100,000 
2, 700,000 

Yen 

2,343 

15.248 

76,400 

106,600 

7.0 

:  0 

s    ,, 

8.0 

Yen 

723.435 
1,911,118 

3.532, 080 

5.287,744 

Yen 

703.544 

1 .501 

2,102,857 
2,646,278 

Total  . .  . 

7,0  p,  |oo 

200,, SO  I 

ii.454.377 

6,954 

Bank  oj  Formosa 
The  Bank  of  Formosa  was  established  in  accordance  with 
Law  No.  38  of  March,  1897,'  as  the  central  financial  institu- 

1  Concerning  the  Bank  of  Formosa. 


[86        ECONOMIC    EFFECTS   OF   THE   SINO-JAPANESE   WAR 

tion  of  Formosa,  with  the  object  of  furnishing  capital  for 
commerce,  industry  and  public  works,  of  developing  the 
economic  resources  of  Formosa,  and  of  extending  the  scope  of 
business  of  the  Bank  to  South  China  and  the  South  Sea 
Islands  by  providing  a  financial  organ  for  the  commerce  of 
these  countries;  the  Bank  was  also  intended  to  secure  the 
economic  independence  of  Formosa  and  reform  the  monetary 
system.  The  government  believed  that  the  sound  develop- 
ment of  Formosa  could  not  be  hoped  for  unless  protection  was 
given  to  the  Bank,  in  view  of  the  conditions  prevailing  in  the 
island,  where  everything  was  still  undeveloped,  peace  and 
order  were  not  yet  secured,  and  the  credit  system  was  not  yet 
established.  So,  by  Law  No.  35  of  March  1,  1899,1  (1)  2 
million  yen  of  silver  were  lent  to  the  Bank  without  interest,  to 
be  used  exclusively  as  a  reserve  fund  for  the  conversion  of 
notes,  (2)  1  million  yen  of  the  5  million  yen  capital  of  the 
Bank  were  subscribed  by  the  government.  In  addition,  it 
was  arranged  that  the  dividends  on  shares  payable  to  the 
government  should  be  transferred  for  five  years  to  the  reserve 
fund  for  meeting  the  losses  of  the  Bank,  thereby  making  the 
establishment  of  the  Bank  easier,  and  then  on  July  27  of  the 
same  year,  the  silver  2  million  yen  were  exchanged  for  2,127,- 
659  pieces  of  silver  yen  in  coins  (94  sen  per  1  piece)  and  these 
were  paid  to  the  Bank  together  with  54  sen  of  auxiliary  silver 
coins,  thereby  fulfilling  the  duty  of  subsidizing  the  Bank. 
The  Bank  on  July  22,  1899,  secured  1,250,000  yen  or  one- 
fourth  of  the  authorized  capital  of  5  million  yen,  and  the 
doors  were  opened  on  September  26. 

This  Bank,  as  the  central  bank,  has  the  power  to  issue  notes. 
At  first  by  Article  VIII  of  the  law  concerning  the  Bank  of 
Formosa,  this  Bank  was  authorized  to  issue  notes  valued  at 
5  yen  and  upward  redeemable  in  gold.  But  the  conditions 
in  the  island  were  not  yet  such  as  to  need  this  conversion  into 
gold.  So  by  Law  No.  34  of  March,  1899,  this  regulation  was 
changed  and  the  Bank  was  empowered  to  issue  notes  redeem- 
able in  silver  coin  valued  at  1  yen  and  upward.     As  to  regula- 

1  Concerning  a  subsidy  to  the  Bank  of  Formosa. 


EFFECTS    OX    THE    MONEY    MARKET 


I87 


tions  for  the  reserve,  to  guarantee  the  issue  of  silver  certificates, 
specie  (gold  or  silver)  to  the  amount  of  one-half  and  upward 
of  the  issue  was  to  be  kept  as  a  reserve.  For  the  rest,  up  to 
the  limit  of  5  million  yen,  government  notes,  convertible 
bank  notes  and  other  reliable  certificates  or  commercial 
checks  could  be  made  a  guarantee.  Again,  in  case  of  need  of 
a  further  issue  of  notes,  the  same  amount  of  guarantee  reserve 
was  to  be  kept  in  readiness  and  the  tax  on  the  issue  at  the 
rate  of  5  per  cent  per  annum  or  upward  was  to  be  paid. 
Bank  notes  were  issued  for  the  first  time  on  September  29 
to  the  amount  of  490,000  yen. 

The  following  table  will  show  the  actual  condition  of  the 
business  from  September,  1899,  to  December,  1903. 


1 

Specie  Resen, 

e 

Date 

Guarantee 

Total 

reserve 

Gold 

Silver 

Total 

Yen 

Yen 

Yt>i 

Yen 

Yen 

Sept.,  1899 

449,098 

449,098 

449,098 

Oct.,    1899 

1 ,050,000 

1,050,000 

1,050,000 

Nov.,  1899 

1,523.337 

1.523.337 

1.523.337 

Dec,   1899 

1,834.917 

1. 834.91 7 

1,834.917 

Dec.,   1900 

494.276 

1.577.5*5 

2,071,861 

1  511.529 

1.390 

Dec,   1901 

[,829,358 

1.829,358 

1.370,371 

3.199.729 

Dec,    1902 

3,35^.7"' 

3.352,719 

1,74(1,447 

5,099,166 

Dec,   1903 

222,222 

2,219,303 

2,441.525 

2,181,989 

4.623,514 

Total 

716,498 

13.836,317 

14,552,81s 

6,810,336 

21,363,151 

Again,  the  average  annual  amounts  of  issue  at  the  month's 

end  were  as  follows: 


Yi  .ir 

Spo  ie  reserve 

Guarantee 

<  rve 

Total 

Gold 

Silver 

Total 

1 899 

Yen 

352,134 
-".548 

614.368 

Yen 

1,2]  . 

2,017 

[,92« 

2.799.*N> 
2,027,593 

Yen 
1,214,338 
2,369,702 
1,976,232 

2.799.**<> 
2,64I,96l 

Yen 

-.707 
[,486,970 
1 ,650,9  \o 
2,222,150 

Yen 

1,21 

3.837409 
3,463,202 
4,450,820 
4,864,1 1 1 

1900 

1901 

1902 

1903 

Total 

1 .1117,050 

9,985,063 

I  I,0O2,]  13 

7,767 

17.^29,880 

1 88        FXONOMIC    EFFECTS   OF   THE    SINOJAPANESE   WAR 

As  shown  in  the  foregoing  table,  the  Bank  of  Formosa 
gradually  extended  the  scope  of  its  business.  It  established 
branches  on  the  mainland  of  Japan,  and  branches  and  agencies 
in  Amoy,  Hongkong  and  other  places ;  thereby  more  and  more 
perfectly  rendering  the  service  for  which  it  was  established. 
Table  X  at  the  end  of  this  chapter1  sets  forth  the  principal 
facts  as  to  the  Bank's  activities  in  recent  years. 

Industrial  Bank  of  Japan 

The  Industrial  Bank  of  Japan  was  established  as  a  realty 
bank.  It  was  based  upon  Law  No.  70  of  March,  1900.  About 
1890  our  national  finance  was  freed  from  the  evils  of  incon- 
vertible notes.  When  certain  new  enterprises  were  under- 
taken and  the  money  circulation  became  tight,  the  government 
ordered  the  Bank  of  Japan  to  initiate  the  so-called  security 
system,  that  is,  to  give  discount  or  allow  an  overdraft  for  a 
certain  amount  of  shares  as  guarantee  in  order  to  relieve  the 
urgent  needs  of  the  industrial  world,  and  at  the  same  time  to 
take  over  the  loans  made  in  accordance  with  the  security 
system  mentioned  above,  by  establishing  a  bank  for  personal- 
ties. That  was  how  the  Industrial  Bank  of  Japan  came  to  be 
established.  About  ten  years  later,  when  at  the  close  of  the 
Sino- Japanese  War  new  enterprises  were  projected,  and  as 
capital  was  insufficient  it  became  necessary  to  plan  the 
importation  of  foreign  capital,  this  Bank  was  established  to 
meet  the  need. 

The  Bank's  authorized  capital  amounted  to  10  million  yen, 
and  with  the  passage  of  the  industrial  bank  law  its  establish- 
ment was  planned.  But  at  that  time  the  money  circulation 
was  tight  and  did  not  permit  the  opening  of  the  Bank.  So 
the  issue  of  shares  was  postponed  for  a  time.  The  restoration 
of  a  favorable  money  market  was  awaited.  At  last,  in 
March,  1902,  2,500,000  yen  were  paid  in,  as  the  first  instalment 
on  the  shares  of  the  Bank,  and  the  doors  were  opened  on  April 
10  of  the  same  year.  The  Bank  was  to  make  loans  on  the 
security  of  national  bonds,  bonds  of  local  governments  and 

1  Post  p.  20  5. 


EFFECTS   OX   THE    MONEY  MARKET  1 89 

the  bonds  and  shares  of  various  companies,  and  to  underwrite 
these.  It  was  empowered  to  secure  a  part  of  the  capital  for 
its  business  by  issuing  industrial  bank  bonds.  The  limit  of 
the  bond  issue  was  fixed  at  five  times  the  paid-up  capital  or 
not  to  exceed  the  actual  amount  of  the  loans  or  the  local 
government  bonds  or  company  bonds  then  in  t lie  hands  of 
the  Bank. 

Table  XI  at  the  end  of  this  chapter1  shows  the  actual  re- 
sults of  the  business  of  this  Bank. 

Conditions  in  the  Banking  Industry 
In  the  foregoing  section  we  have  explained  in  detail  how 
the  government,  to  encourage  the  national  development 
after  the  Sino-Japanese  War,  helped  to  establish  various 
special  banks,  and,  by  enlarging  the  spheres  of  the  ordinary 
banks  which  had  been  established  before  the  war,  planned  to 
reform  the  monetary  system.  With  the  change  in  economic 
conditions  after  the  war,  the  government  was  able  to  solve  the 
problem  of  what  disposition  to  make  of  the  national  banks, 
which  had  been  pending  since  before  the  war,  and  thereby 
added  to  the  stability  of  the  monetary  system.  This  should 
be  especially  noted  as  a  result  brought  about  by  the  war. 

The  system  of  national  banks  was  established  in  accordance 
with  Law  No.  349,  with  the  object  of  redeeming  the  govern- 
ment notes  which  had  been  recklessly  issued  since  the  begin- 
ning of  the  Meiji  Era  (1868)  and  of  facilitating  the  circulation 
of  commercial  capital.  We  shall  here  briefly  explain  the 
method  of  issue  of  these  bank  notes.  The  national  banks 
offered  the  government  notes  in  exchange  for  public  loan 
bonds — redeemable  in  gold  certificates,  and  then  by  offering 
the  latter  received  bank  notes.  The  national  bank  notes  were 
convertible  in  specie.  Bui  at  that  time  our  country  exported 
gold  and  silver,  especially  gold,  to  an  enormous  amount.  The 
price  of  gold  coin  rose,  so  thai  there  came  to  be  a  difference 
between  gold  certificates  and  gold  coin,2  and  the  national  banks 

1  Post,  p.  206. 

2  Between  July  1873  and  1876  the  highest  dilTerence  was  4.9  per  cent,  in  March, 
1876. 


I«)0        ECONOMIC    EFFECTS    OF    THE    SINO-JAPANESE    WAR 

could  no  longer  issue  bank  notes.  Consequently,  the  manage- 
ment of  these  banks  became  very  difficult,  and  only  four  or 
five  of  them  were  established.  The  government  in  order  to 
encourage  the  establishment  of  national  banks  and  enable 
them  to  accomplish  the  original  purpose  and  at  the  same  time 
to  maintain  the  price  of  the  enormous  amount  of  bonds  newly 
issued  at  the  time  the  change  in  the  system  was  made, 
changed  the  system  of  specie  conversion  into  the  system  of 
conversion  into  currency,  that  is,  government  notes,  by 
Law  No.  1 06  of  August,  1876.  Thus  appeared  the  incon- 
vertible bank  notes.  After  this  banks  were  established  one 
after  another,  153  banks  being  established  from  September, 
1876,  to  November,  1879,  with  a  paid-up  capital  amounting 
in  all  to  40,616,063  yen,  while  the  notes  issued  amounted  to 
34,046,014  yen. 

But,  later,  the  government  notes  were  not  redeemed  at  all, 
and  at  the  end  of  January,  1878,  the  highest  point  was  reached, 
the  notes  issued  amounting  to  139,301,593  yen.  Moreover, 
the  inconvertible  bank  notes  increased  gradually  and  the 
price  of  notes  decreased  until,  in  1881,  the  lowest  point  was 
touched  when  the  difference  between  notes  and  specie  reached 
93  per  cent  against  gold  and  79.5  per  cent  against  Mexican 
silver.  Thereupon  the  government  decided  to  redeem  the 
various  notes  and  at  the  same  time  to  change  the  system. 
Separate  banks  were  replaced  by  one  central  bank  and  in  1882 
the  Bank  of  Japan  was  established;1  from  1884  convertible 
bank  notes  were  issued.2  Again  the  government,  by  Law 
No.  14,  of  June,  1885,  decided  to  begin  the  conversion  of 
government  notes  into  silver  coins  in  January,  1886.3  In 
regard  to  these  banks,  it  must  be  added  that  the  government 
revised  the  national-bank  regulations  on  May  5,  18834  thereby 
fixing  the  period  of  existence  at  twenty  years  in  full  from  the 
day  the  permit  was  issued;  the  term  limit  of  the  banks  ex- 
pired between  September,  1886,  and  December,  1899.     Fur- 

1  Law  No.  32  of  1882. 

2  Law  No.  18  of  May,  1884. 

3  At  the  end  of  1885  the  government  notes  amounted  to  88,345,096  yen. 

4  Law  No.  14. 


EFFECTS    OX    THE    MONEY    MARKET  I9I 

thermore,  it  was  decided  to  redeem  the  bank  notes,  amount- 
ing to  31,812,880  yen,  which  existed  at  the  time  by  the 
following  method.  This  was  called  the  united  method  of  re- 
demption of  national  bank  notes.  As  for  a  while  it  caused 
a  great  sensation  in  political  circles  after  the  Sino-Japanese 
War,  we  shall  briefly  explain  below  this  method  of  redemption. 

(1)  The  national  banks  shall  deposit  with  the  Bank  of 
Japan,  for  conversion  of  the  notes  a  reserve  (currency) 
amounting  to  one-fourth  of  the  notes  allowed  them,  which 
reserve  shall  be  kept  as  a  time  deposit  during  the  years  in 
which  the  banks  are  operated,  to  be  applied  to  the  redemption 
of  the  notes  (first  class  redemption  fund). 

(2)  The  national  banks  shall  set  aside  out  of  their  profits  at 
the  end  of  each  half  year  an  amount  equal  to  2.5  per  cent  per 
annum  of  the  amount  of  the  notes  allowed  them  and  shall 
deposit  this  with  the  Bank  of  Japan  as  a  fund  for  the  redemp- 
tion of  the  notes  (second  class  redemption  fund). 

(3)  The  Bank  of  Japan  shall  purchase  interest-bearing 
bonds  with  the  foregoing  sums  and  shall  redeem  notes  with  the 
interest  and  transfer  the  notes  to  the  Department  of  Finance. 
The  Department  of  Finance  shall  then  hand  over  public  loan 
bonds  to  said  bank  equal  in  amount  to  those  redeemed. 

According  to  the  estimate  at  the  time,  the  market  price  of 
the  public  loan  bonds  bearing  7  per  cent  interest  was  expected 
to  be  as  mentioned  below,  as  the  result  of  which  transaction 
the  amount  of  interest  on  bonds  purchased  up  to  1897  with 
the  first-class  redemption  fund  would  amount  to  [0,738,982 
yen,  and  the  amount  of  the  face  value  of  the  bonds  purchased 
with  the  second-class  redemption  fund  to  13. 791, 515  yen  and 
the  interest  to  7,992,224  yen,  totaling  32,522,721  yen.  This 
plan  was  to  leave  a  certain  amount  of  surplus  compared  with 
the  existing  amount  of  the  notes,  the  banks  being  able  to 
redeem  a  greater  part  of  the  notes  with  a  portion  of  the  in- 
terest of  the  reserve  fund  and  the  profits  at  the  time  of  the 
expiration  of  the  business  term.  Moreover,  it  was  expected 
that  the  public  loan  bonds  and  the  reserve  fund  would  remain 
in  the  possession  of  the  bank,  and  that  the  notes  issued  would 


192       ECONOMIC   EFFECTS   OF  THE   SINO- JAPANESE   WAR 

return  to  the  bank  indirectly  in  the  form  of  currency,  so  that 
the  problem  would  be  satisfactorily  solved.  But  this  plan 
was  impracticable  for  two  reasons.  One  was  that  the  price 
of  bonds  rose,  and  the  other  that  the  bonds  bearing  7  per  cent 
interest  disappeared.  For  the  former  reason  the  amount 
needed  to  purchase  the  bonds  was  reduced.  For  the  latter  the 
amount  of  interest  was  reduced.  The  following  table  will 
show  a  comparison  between  the  price  of  bonds  as  estimated 
at  the  time  of  the  initiation  of  the  united  plan  of  redemption 
and  that  actually  received : 


Comparison  of  Estimated  and 

Actual  Price  of  Bonds,  1 883-1 895 

Year 

Estimated  price 
of  bonds 

Rate  of 
interest 

Actual  price  of 
bonds 

Rate  of 
interest 

188"?      

Yen 
80,000 
80,000 
80,000 
85,000 
85,000 
85,000 
85,000 
90,000 
90,000 
90,000 
90,000 
95,000 
90,000 

Per  cent 
7 

7 
7 
7 
7 
7 
7 
7 
7 
7 
7 
7 
7 

Yen 

83,947 

93,393 

96,331 

107,309 

101,578 

101,445 

101,015 

99,866 

100,451 

101,726 

106,962 

105,270 

99,703 

Per  cent 

7 

1884   

7 

188s      

7 

1886 

7 

1887    

5 

1888 

5 

1889 

5 

1 890    

5 

1891 

5 

5 

180-1         

5 

1  8qa 

5 

t8q<;    

5 

The  difference  between  the  estimated  price  and  the  actual 
market  price  was  as  just  stated.  Moreover,  in  1886,  the 
law  of  consolidated  bonds  was  established,  and  from  March, 
1887,  the  bonds  of  5  per  cent  or  above  were  redeemed  so  that 
it  became  impossible  to  purchase  7  per  cent  bonds. 

These  facts  produced  a  great  miscalculation  in  the  estimate 
of  the  redemption  fund. 

Thereupon,  the  national  banks  asked  for  a  postponement  of 
the  right  to  issue  notes,  in  order  to  make  up  for  the  losses 
arising  from  the  miscalculation  mentioned  above.  The  gov- 
ernment on  the  other  hand  tried  to  deprive  them  of  their 
special  privilege  upon  the  expiration  of  the  business  term  and 


EFFECTS    ON    THE   MONEY    MARKET  I  93 

to  change  them  into  private  banks,  only  thus  allowing  them  to 
continue  their  business  (advocacy  for  continuation).  Thus 
the  two  diverse  opinions,  as  to  extension  or  continuation, 
constituted  a  great  problem  for  the  nation,  especially  for  the 
Diet,  from  ante-war  times.  But  after  the  war,  the  confusion 
in  the  money  market  increased,  so  that  the  advocates  of 
extension  gained  the  upper  hand,  enthusiastically  upholding 
this  doctrine  on  the  ground  that  the  future  money  market 
would  become  tighter  and  the  price  of  bonds  would  fall,  and 
that  the  reason  why  the  price  of  bonds,  which  had  risen 
ordinarily  at  the  time  of  the  Sino-Japanese  War,  was  main- 
tained, lay  in  the  fact  that  the  national  banks  needed  them. 
For  a  while  many  people  considered  this  view  as  being  a 
reasonable  one.  So  the  government  by  law  ordered  the  Bank 
of  Japan  to  lend  capital  for  the  redemption  of  notes  amounting 
to  22  million  yen,  without  interest,  in  order  to  relieve  the 
national  banks  from  the  difficulties  which  had  arisen  from  the 
aforementioned  miscalculation.  But,  fortunately,  from  the 
latter  half  of  1895  the  market  value  of  securities  generally 
rose  and  with  renewed  activity  in  industrial  and  commercial 
circles  the  banking  business  became  most  profitable.  So  the 
once  powerful  advocates  of  the  doctrine  of  extension  lost  their 
influence,  and  a  bill  embodying  the  first  principle,  that  of 
continuation,  was  passed  by  the  Imperial  Diet,  and  at  last  the 
153  national  banks  disappeared  altogether  from  the  eco- 
nomic world  in  February,  1899.  Of  these  153  banks,  8 
dissolved  of  themselves  on  the  expiration  of  their  terms,  16 
amalgamated  and  7  closed  their  doors.  Only  122  continued 
as  private  institutions.  Of  these,  30  were  changed  after,  and 
92  before,  the  expiration  of  their  term. 

We  have  so  far  explained  the  problem  of  adjustment 
connected  with  the  national  banks.  We  shall  now  glance  at 
the  banking  business  in  general.  In  the  first  place,  as  a  re- 
sult of  this  reconstruction  of  the  national  banks,  a  number  of 
specially  privileged  banks,  including  the  Bank  of  Japan,  the 
Yokohama  Specie  Bank,  the  National  Bank,  the  Hypothec 
Bank  of  Japan,  the  Banks  of  Agrirulture  and  Industry,  the 
14 


194       ECONOMIC   EFFECTS   OF   THE   SINO-JAPANESE   WAR 

Colonial  Bank  of  Hokkaido,  the  Industrial  Bank  of  Japan,  the 
Bank  of  Formosa,  and  a  number  of  ordinary  banks,  were 
considerably  changed,  as  shown  below: 


Increase 

IN 

Number  of 

Banks, 

1 893-1903 

Main  Banks 

Total 

Branch  Banks 

Year 

Special 
banks 

Ordinary 
banks 

Savings 
banks 

Special 
banks 

Ordinary    S, 
banks        t 

ivings 
>anks 

Total 

1893..- 

135 

545 

23 
ia 

703 

162 

165 

12 

339 

1894..  . 

135 

700 

30 

ia 

865 

188 

196 

30 

414 

1895-- • 

135 

792 

'    86 
6a 

1,013 

193 

277 

107 

577 

1896..  . 

123 

1,005 

149 

,    44a 

1,277 

180 

428 

224 

832 

1897.- • 

61 

1,223 

221 
,    91* 

1,505 

83 

651 

270 

1,004 

1898..  . 

48 

1,444 

260 

,i58a 

i,752 

18 

912 

453 

1,383 

1899..  . 

49 

1,561 

333 
l  198* 

i,943 

30 

1,069 

631 

1,730 

1900. .  . 

51 

1,802 

419 
262* 

2,272 

32 

1,374 

814 

2,220 

1901..  . 

51 

1,867 

441 

,273s 

2,359 

33 

i,457 

^542 
>337a 

2,032 

1902..  . 

52 

1,841 

431 
270* 

2,324 

34 

1,470 

536 
,33ia 

2,040 

1903- •  • 

52 

1,754 

469 

L2I9a 

2,275 

35 

1,441 

58b 
291" 

2,062 

•Ordinary  banks  conducting  savings  business  so  their  number  waa  not  included  in  the  total 
figures. 

Table  XII  at  the  end  of  this  chapter1  will  show  the  amount 
of  capital,  deposits,  net  profits,  and  dividends  of  these 
banks. 

The  following  table  will  show  the  amounts  of  deposits  and 
loans  for  the  various  banks : 2 

lPost,  p.  207. 

2  The  special  banks  include  the  Bank  of  Japan,  the  National  Banks  (up  to  the 
end  of  1898),  the  Yokohama  Specie  Bank,  the  Hypothec  Bank  of  Japan  (after 
1897),  the  Banks  of  Agriculture  and  Industry  (after  1898),  the  Bank  of  Formosa 
(after  1899),  the  Colonial  Bank  of  Hokkaido  (after  1900),  and  the  Industrial  Bank 
of  Japan  (after  1902). 


EFFECTS    ON   THE   MONEY   MARKET 
Bank  Deposits  and  Loans 


195 


Deposits 

Loans 

Year 

Amount 

Percentage 
(1893=100) 

Amount 

Percentage 
(1893=100) 

1893 

Yen 
115. 139.920 
138,452,655 
190,840,473 
430,234,984 
383,910,820 
400,892,757 
606,053,315 
610,010,408 
604,618,138 
712,677,790 
778,514,683 

100. 0 
120.2 
165-7 
373-7 
333-4 
438.2 

526.4 
529  -8 
525-1 
619.0 
676.1 

Yen 

195.017,509 
227,909,656 

322,645,257 
543,823,073 
500,821,394 
648,390,268 
882,574,248 
992,247,666 
921,074,784 
991,138,278 
1,046,774,556 

100. 0 

1894 

116. 9 
165.2 

278.9 
256.8 

332.5 
452.6 
508.8 

472.3 
508.2 
536.8 

1895 

1 896 

1897 

1898 

1 899 

1900 

1901 

1902 

1903 

4.971.345.943 

7,272,416,689 

The  foregoing  figures  show  the  conditions  of  the  banks  in 
Japan  after  the  Sino-Japanese  War.  In  point  of  capital, 
deposits  and  loans,  all  made  rapid  progress.  Especially  in 
1899  was  their  development  very  remarkable,  after  the  period 
of  adjustment  of  the  national  banks.  All  this  followed  as  a 
result  of  the  activity  of  economic  circles  after  the  war,  but 
the  reconstruction  of  the  national  banks  had  a  great  deal  to 
do  with  producing  this  prosperous  condition.  Therefore,  we 
can  not  but  recognize  the  fact  that  the  war  after  all  had  no 
small  effect  upon  the  banking  industry. 


I96       ECONOMIC   EFFECTS   OF   THE   SINO- JAPANESE  WAR 


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EFFECTS    ON   THE    MONEY   MARKET 


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198       ECONOMIC   EFFECTS   OF   THE   SINO- JAPANESE  WAR 


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CHAPTER  IV 
EFFECTS  ON   INDUSTRIES 

Following  the  crisis  of  1890,  came  business  depression, 
which  lasted  for  three  years,  from  1891-1893.  During  these 
three  years,  the  principle  of  conservation  was  most  carefully 
followed  in  every  branch  of  industry  in  Japan,  and  no  positive 
plans  were  adopted  for  any.  Meanwhile,  however,  Japanese 
business  recovered  from  the  blows  of  the  past,  the  failures  of 
the  previous  years  were  forgotten,  conditions  favorable  to 
productive  power  were  secured,  and  the  once  disturbed  state  of 
the  business  world  was  remedied.  As  a  result,  capital  ac- 
cumulated, the  condition  of  the  money  market  became 
sluggish  and  the  business  people  of  the  country  were  thus 
prepared  to  enter  upon  fresh  activities.  But  just  at  this 
time  the  Sino-Japanese  War  broke  out,  and  the  nation,  putting 
everything  else  aside,  was  compelled  to  devote  its  whole 
energy  to  the  prosecution  of  the  war,  which  was  a  life-and- 
death  struggle  to  Japan. 

Fortunately  for  her,  Japan  won  a  glorious  victory  and  in- 
creased her  prestige  greatly  in  the  eyes  of  the  whole  world. 
People  in  general  were  encouraged  by  this  victory  to  such  an 
extent  that  the  money  market,  after  having  met  the  very 
large  expenditure  necessitated  during  the  war,  showed  reserve 
power  after  the  war  was  over.  Encouraged  by  this  favorable 
state  of  the  money  market,  the  enterprise  of  the  people,  which 
had  been  restrained  during  the  war,  suddenly  burst  forth 
everywhere  in  new  business  undertakings.  Of  the  various 
branches  of  business  which  the  minds  of  the  people  were  thus 
stimulated  to  engage  in  during  these  years,  railways  came 
first,  and  next  banking,  while  the  least  enthusiasm  was  shown 
for  general  commerce  and  industry. 

A  glance  at  the  conditions  of  industry  in  Japan  during  the 
war  shows  that  while  the  interference  with  communication 
and  the  money  market  affected  to  some  extent  the  general 

208 


EFFECTS  ON  INDUSTRIES 


209 


industries  of  the  country,  yet  on  the  other  hand  the  unusual 
activity  apparent  in  munition  factories,  occasioned  by  the 
need  of  munitions  on  the  battlefield,  balanced  this  depression. 
Besides,  in  those  days,  most  of  the  industries  in  Japan  were 
still  at  the  outset  of  their  development,  and  therefore  supply- 
ing local  demands  only,  so  that  they  did  not  sustain  any  very 
serious  blows  during  the  war.  Indeed,  it  may  be  stated  that 
even  during  the  war  industries  in  Japan,  generally  speaking, 
made  some  progress,  and  when  a  business  boom  set  in  after 
the  war  their  advancement  was  of  course  still  more  remarkable. 
Thus  during  these  years  the  Japanese  laid  the  basis  for  the 
notable  progress  which  their  industries  attained  after  the 
Russo-Japanese  War  in  later  years.  Let  us  first  look  at  the 
conditions  of  industrial  investment  in  Japan.  As  we  have 
no  authentic  materials  for  a  survey  of  the  whole  field  of  in- 
dustry, we  shall  tabulate  the  amount  of  capital  of  the  com- 
panies engaged  in  various  industries  as  follows: 

Capital  Investment  in  Industry 


Paid-up 

capital 

Year 

Number  of 
companies 

Authorized 
capital 

Reserve 

Amount 

Increase 

Yen 

Yen 

Per  Cent 

Yen 

1896. 

1.367 

I43.6i7.530 

89,900,900 

100. 0 

7,404,980 

1897- 

1,881 

165,332,633 

105,381,106 

1 17.2 

7.58i,535 

1898. 

2,164 

183,657,046 

1  22,066,653 

135-8 

11,64 

1899. 

2,253 

222,673,634 

1  17.; 

164.4 

13,467,802 

1900. 

2,554 

216,766,903 

158,851,730 

17"   7 

17,697.540 

1901 . 

2.477 

2  l' 1.249,806 

K><),2i)3,oi>3 

185.O 

24,057,360 

1902 

2,427 

222,120,693 

1  73, 

192.7 

24,794.154 

1903- 

2,441 

214,404,088 

170,346.340 

1895 

29,966,661 

Tot 

al  . 

17.564 

1,587,822,333 

1,133,845,701 

136,613,025 

As  the  figures  in  the  foregoing  table  indicate,  the  capital 
invested  in  certain  industries  was  doubled  in  the  lour  or  five 
years  subsequent  to  1896,  and  thenceforward  it  continued  to 
increase  at  the  same  rate.  Yet  when  compared  with  the 
amount  of  capital  invested  in  other  kinds  of  business,1  it  will 

1  Cf.  table,  p.  210. 

is 


210        ECONOMIC    EFFE(   fS    OF    THE    SINO- JAPANESE    WAR 


be  seen  that  the  increase  in  capital  of  the  companies  engaged 
in  these  industries  was  far  smaller  than  that  of  companies 
engaged  in  agricultural  and  commercial  business  and  in  com- 
munication. The  percentage  of  this  industrial  investment 
compared  with  the  total  amount  of  investment  in  all  these 
different  kinds  of  business,  too,  was  generally  less  than  20  per 
cent;  so  that  it  may  be  seen  that  industrial  investment  did  not 
increase  steadily  during  said  years.  In  a  word,  it  may  be 
stated  that  industrial  enterprises  did  not  make  any  consider- 
able progress  during  this  period. 

Ratio  of  Industrial  Investment  to  Total  Investment 


Year 

Indus- 
trial com- 
panies 

Agricul- 
tural com- 
panies 

Commer- 
cial com- 
panies 

Communi- 
cation com- 
panies 

Total 

Ratio  of 

industrial 
investment 
to  the  total 

1896  .  . 

1897  .  . 

1898  .  . 

1899  .  . 

1900  .  . 

1901  .  . 

1902  .  . 

1903  .  . 

Per 
100 
117 

135 
164 
.      176 
-       185 
192 
189 

:ent 

0 

2 

8 

4 

7 

0 

7 
5 

Per 
100 

134 
141 

139 
157 
159 
154 
192 

:ent 
0 

5 
0 
0 

8 

7 
0 

9 

Per  cent 

100. 0 
I35-0 
155-7 

174. 1 
201 .9 
216.5 
228.4 
234-4 

Per  cent 
100. 0 

145-5 
174.2 

I75-0 
202.0 
214.8 
232.0 
231.7 

Per  cent 

100. 0 
I34-0 

1564 
172.0 
196.0 
208.7 

221 . 1 
223.3 

Per  cent 
22.6 
19.8 
19.6 
21 .6 
20.4 
10. 0 
19.7 
19.2 

Of  the  industrial  companies  whose  paid-up  capital  is  rep- 
resented in  the  foregoing  table,  those  having  one  million  yen 
or  more  at  the  end  of  the  year  1903,  and  making  somewhat 
rapid  progress,  were  the  companies  engaged  in  the  branches  of 
industry  given  in  the  following  table.  The  condition  of  these 
companies  indicates  fairly  well  the  general  condition  of  the 
business  world  following  the  Sino-Japanese  War. 

As  the  figures  in  this  table  indicate,  the  industries  which 
made  most  progress  during  this  period  were  the  cleaning  of 
grain,  manufacturing  of  soy  bean  paste,  and  tobacco,  ship- 
building, electric  light  manufacturing,  printing,  paper  mill- 
ing, and  cement  manufacturing.  All  these  industries  ex- 
cept tobacco,  whose  success  had  a  great  deal  to  do  with  the 
establishment  of  the  government  monopoly  system,  attained 


EFFECTS   ON    INDUSTRIES 
Progress  of  Industries,  i 896-1903 


211 


Industry 


December 
31/1896 


Grain  refining 

Sake  brewing 

Beer  brewing 

Soy  and  bean  paste 
manufacturing 

Sugar  refining 

Tobacco  manufacturing 

Manufacturingof  medi- 
cines and  chemicals.  . 

Cotton  spinning 

Other  spinning 

Raw  silk 

Hemp  yarn 

Silk  textiles 

Cotton  textiles 

Hemp  textiles 

Woolen  textiles 

Mining  and  refining  . .  . 

Shipbuilding 

Railway  wheel  making 

Electric  light  works  .  .  . 

das  works 

Printing 

Paper  milling 

Tanning  and  manufac- 
turing of  leather 
goods 

Nets  and  rods 

Petroleum  boring  and 
refining 

Cement  making. 

Fertilizer  manufacturing 


December 
31.  i*99 


Yen 

344,668 

2,056,895 

(unknown) 

325.392 
1,474,106 

1,  H3.°99 

(unknown) 
28,770,847 
(unknown) 

3.869,877 

(unknown  i 

245.355 
2,355.178 

790,000 

814,416 

8,585,560 

2,272,866 

(unknown) 

4,624,097 

(unknown) 

690,067 
2,872,793 


523.250 
668,210 

9,500,000 
1,330,000 

(unknown) 


1.2  55.978 
6, 1 33.°44 
2.756.940'1 

928,460 

2,419,968 

11,320,965 

(unknown) 

30,313.054 

5.I95.89I 

4.547.215 

3,066,120* 

748.079 
3.975.940 
(unknown) 
2,367,000 
10,020,418 
5,011,600 
(unknown) 
7,909,018 
2,302,400" 

992,061 
6,265,095 


636,4*5 
648,410 

14,241,109 

4,078,085 

660,560 


December 
31.  1903 


Yen 

i,4<>8,426 

3.748,253 
3.156,470 

1,943.796 
2,710,300 

13.385.933 

2,132,865 

32,666,875 
7,010,070 
4,620,788 
1,607,230 

2,075,844 

1,201,199 

1,788,400 

1,926,750 

10,933,235 

10,530,100 

1,470,000 

12,151,561 

5,544,500 

1,806,814 

8,729,661 


1,128,815 
1,033,500 

4.4')7.743 
3.767.374 
1,850,462 


ise  of 
190^ 
[896 


Per  Cent 

435 
182 


184 

1,202 


114 
119 

846 

51 
226 

237 
127 

463 

263 

262 
304 


216 

155 

47 
283 


»  As  of  December  31,  1900. 

their  several  degrees  of  progress  as  a  result  of  the  general 
advance  in  the  conditions  of  society  at  large  after  the  war. 
Let  us  then  note  the  number  of  factories  in  operation,  with 
the  number  and  horse  power  of  machines  in  use,  and  we  shall 
see  what  remarkable  progress  the  totals  in  the  following  table 

indicate.1 

Now  let  us  compute  the  number  of  factory  hands.  Be- 
tween 1896  and  1906,  this  was  about  430,000,  without  any 
considerable  change  during  these  years.     About  40  per  cent 

1  Cf.  detailed  figures  given  on  pp.  221  and  222  relative  to  the  ages  and  summary 

of  factory  hands,  etc. 


212        ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 
Factories  in  Operation  and  Horsepower  of  Engines 


Year 

Number  of 
factories 

Percentage 

Number  of 
engines 

Percentage 

Horse 
power 

Percentage 

1893  •  • 

1894  .  . 

1895  •  • 

1896  .  . 

1897  •  • 

1898  .  . 

1899  .  . 

1900  .  . 

1901  .  . 

1902  .  . 

1903  .  . 

3.019 
5.985 
7J54 
7.640 
7.287 
.       7.085 
6,699 
7,284 

7.349 
7,821 

8,274 

1 00.0 

198.7 
237.0 

253- 1 
241.4 

234  7 
221 .9 
241.3 
243-4 
259- 1 
274.1 

2,080 
4,020 
4.989 
5.459 
5.88o 

5.172 
4.093 
3.977 
4.551 
4,808 
5.226 

100. 0 
193-3 
239-9 
262.5 
282.7 

248.7 
196.8 
191 .2 
218.8 
231  .2 
251-3 

32,811 

41.031 
61,252 

64.429 
63.434 
79,016 
76,885 
95,392 

91,585 
100,901 
102,797 

100 

125 
186 
196 

193 
240 

234 
290 
279 
307 

313 

0 
1 

7 
4 
3 
8 

3 
7 

1 

5 
3 

of  these  hands  were  males,  and  the  remaining  60  per  cent 
females.  Considered  as  to  age,  90  per  cent  of  the  total  number 
were  14  years  or  older,  and  the  remaining  10  per  cent  young 
hands  less  than  14  years  of  age.  About  93.4  per  cent  of  the 
total  number  of  male  hands,  and  about  85.6  per  cent  of  the 
total  number  of  female  hands  were  more  than  14  years  of  age. 
From  these  figures,  it  may  be  inferred  that  the  number  of 
young  hands  (those  under  14  years  of  age)  was  small  among 
male  hands,  but  comparatively  large  among  female  hands,  as 
Table  I  at  the  end  of  this  chapter1  indicates. 

Of  the  figures  given  in  the  foregoing  pages,  the  most  im- 
portant may  be  summarized  as  shown  in  the  table  on  the 
next  page.  As  some  figures  are  lacking  in  the  table,  we  can 
not  make  comparison  with  the  time  previous  to  the  war. 
While  it  is  true  that  during  and  after  the  war  industrial 
schemes  were  started  in  various  parts  of  the  country,  yet  we 
must  realize  that  the  industrial  development  attained  by  the* 
Japanese  during  those  years  can  not  be  called  remarkable. 
Except  in  the  production  of  half-manufactured  articles,  an 
industry  which  had  been  developing  in  Japan  even  before  the 
war,  the  progress  made  during  this  period  was  only  in  those 
branches  of  industry  devoted  to  the  production  of  articles 
for  home  consumption  or  those  necessitated  by  the  improve- 
ment in  standards  of  living,  but  not  for  export.     This  may  be 

lPost,  p.  218. 


EFFECTS   OX    INDUSTRIES  213 

Ratio  of  Capital  Invested,  Factories  and  Factory  Hands,  1893 


No.  of  factory  hands 

Paid-up 

capital 

No.  of 
factories 

Xo    of 

Year 

engines 

power 

Male 

Female 

Total 

1893  . .  . 

100. 0 

100. 0 

1 00.0 

(unknown) 

(unknown) 

(unknown) 

1894  ••• 

1895  •  •  • 

(unknown) 

198.2 

193-3 

125. 1 

(unknown) 

(unknown) 

(unknown) 

(unknown; 

2370 

239-9 

186.7 

(unknown) 

(unknown) 

(unknown) 

1896  . .  . 

IOO.  0 

253-0 
1 00.0 

262.5 
100. 0 

196.4 
1 00.0 

100. 0 

100. 0 

100. 0 

1897  •  ■  • 

II7- 2 

241.4 
95- 4 

282.7 
107.7 

190.6 
98.5 

105-5 

97-5 

100.7 

1898  . . . 

135.8 

234-7 
92.7 

248.7 
94-7 

240.8 
122.6 

101.7 

89-5 

94   4 

1899  •-.- 

164.4 

221 .9 

87.7 

196.8 
75-0 

234-3 
H9-3 

86.6 

98.0 

93   4 

1900 

176.7 

241-3 
95-4 

191 .2 
72.9 

290.7 
148. 1 

88.7 

94-9 

92.4 

1901  . . . 

18S.O 

243-4 
96.2 

218.8 
834 

279.1 
142. 1 

90.6 

98.2 

95-2 

1902  . . . 

192.7 

259- 1 
102.4 

231  -2 

88.1 

307  -5 
1566 

106.3 

119. 6 

H4-3 

1903  ■ • ■ 

189. s 

274-1 
108.3 

251-3 
95-7 

313   3 
159.6 

104.4 

1 15  ■  1 

no. 8 

seen  from  the  fact  that  of  the  total  value  of  exports  from 
Japan  to  foreign  countries  in  these  years,  half-manufactured 
articles  were  usually  45  or  50  per  cent.  However,  the  value  of 
imported  half-manufactured  articles  was  between  15  and  20 
per  cent  against  about  25  per  cent  of  manufactured  articles, 
while  the  value  of  imported  manufactured  articles  was  26  to  30 
per  cent,  although  this  percentage  began  gradually  falling 
towards  the  end  of  the  decade  1 893-1 903. 

In  summing  up,  it  may  be  stated  that  while  we  must  admit 
that  after  the  Sino-Japanese  War  the  Japanese  were  encour- 
aged by  the  favorable  economic  condition  to  start  various 
industrial  enterprises,  these  schemes  were  on  rather  a  small 
scale.  Then,  again,  the  various  industries  thus  started  were  all 
for  the  purpose  of  supplying  domestic  needs,  and  no  develop- 
ment was  attained  in  industries  for  the  production  of  export 
articles.  Though  the  glorious  victory  and  the  intervention 
of  the  Powers  hastened  the  national  awakening  of  tin-  Japa- 
nese people  to  a  great  extenl .  yet  it  was  >till  too  early  tor  any 
elaborate  reorganization  of  the  industrial  world.  The  go's  em- 
inent was  too  busy  with  work  such  a-  the  administration  of 
state  finances,  the  reform  of  the  currency  system,  adjustment 
of  the  money  market,  preparation  of  armaments,  etc.     A-  to 


214       ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 

the  people,  it  was  only  a  short  time  after  the  country  had  been 
opened  to  foreign  intercourse,  and  they  did  not  have  capital 
enough  to  do  any  work  independent  of  the  government.  For 
these  reasons,  neither  the  government  nor  people  of  Japan 
could  yet  lay  a  firm  foundation  for  the  establishment  of  what 
may  be  called  an  industrial  empire  in  Japan.  This  they  ought 
to  have  done  as  a  result  of  the  war,  and  it  is  much  to  be 
regretted  that  it  was  impracticable,  because  the  establishment 
of  an  industrial  empire  is  an  indispensable  requisite  in  the 
improvement  of  international  finance.  When  we  consider  the 
elevation  in  Japan's  international  position  after  the  war,  the 
maintenance  of  the  gold  standard  adopted  after  the  war,  and 
the  increase  in  the  people's  purchasing  power  which  accom- 
panied the  importation  of  the  indemnity  from  China,  we  regret 
this  the  more.  Even  at  the  present  time  (191 5),  about  20 
years  after  the  Sino- Japanese  War,  we  have  still  failed  to 
establish  such  an  industrial  empire,  hindered  especially  by 
the  Russo-Japanese  War,  and  this  fact  alone  tells  something 
of  the  industrial  conditions  of  Japan  in  those  post-bellum 
years. 

The  State  of  Industrial  Capital 

The  general  condition  of  capital  investment  in  industrial 
works  was  briefly  set  forth  in  the  previous  section.  We  shall 
now  consider  the  amounts  of  paid-up  capital  in  the  hands  of 
companies  engaged  in  the  principal  branches  of  industry. 
Table  II  at  the  end  of  this  chapter1  gives  the  figures  for  the 
years  1 896-1 903. 

None  of  these  figures  suggest  large  investments  certainly. 
Industries  were  started  during  these  years  either  for  the  pur- 
pose of  meeting  home  demands  or  of  laying  the  foundations 
for  later  development,  as  when  Japan  might  become  a  leader 
in  the  production  of  articles  for  export  to  foreign  countries. 

The  State  of  .  Industrial  Labor 

In  the  statistics  published  by  the  Department  of  Agricul- 
ture and  Commerce  as  to  the  condition  of  industrial  factory 

1  Post,  p.  219. 


EFFECTS    OX    INDUSTRIES  215 

labor  in  Japan,  figures  for  1895  and  earlier  are  lacking,  so 
that  we  have  not  the  materials  for  a  comparison  of  the 
conditions  of  factory  labor  before  and  after  the  Sino-Japanese 
War.  An  investigation  of  the  average  number  of  factory 
hands  employed  in  industrial  work,  as  furnished  in  the  official 
statistics  published  since  the  year  1896,  shows  us  that  about  10 
per  cent  of  the  whole  population  of  the  empire  was  employed 
in  this  kind  of  labor.     See  Table  1 1 1  at  the  end  of  this  chapter.1 

If  the  factory  hands  enumerated  in  Table  III  are  divided 
into  two  classes,  adult  and  young,  with  the  age  of  14  as  the 
dividing  point,  we  shall  find  that  the  adult  hands  (14  years 
old  or  older)  are  about  90  per  cent  of  the  total.  See  Table 
IV  at  the  end  of  this  chapter.2 

The  proportion  between  male  and  female  hands  is  40  per 
cent  male  and  60  per  cent  female.  Although  the  number  of 
male  hands  did  not  increase  much  during  these  years,  the 
number  of  female  hands  increased  somewhat  rapidly.  Of  the 
male  hands,  about  94  per  cent  were  adults,  while  of  the 
female  hands,  adults  formed  about  87  per  cent  of  the  whole 
number.  Therefore  it  may  be  inferred  that  young  female 
hands  were  more  numerous  than  male.  See  Table  V  at  the 
end  of  this  chapter.3 

Percentages  as  to  average  daily  wage  of  adult  factory 
hands  in  the  principal  branches  of  industry  (such  as  flour 
milling,  yarn  spinning,  manufacturing  of  textile  fabrics,  knit- 
ting, machine  making,  shipbuilding,  furnace  working,  gas 
works,  paper  milling,  dyeing,  etc.)  during  this  period,  as  in- 
vestigated by  the  Department  of  Agriculture  and  Commerce, 
are  given  in  Table  VI  at  the  end  of  this  chapter.4  Compared 
with  independent  workmen  such  as  carpenters,  plasterers, 
etc.,  the  increase  in  wage  appears  rather  small. 

As  regards  the  kinds  of  independent  labor  given  in  the  table 
for  reference,  further  notes  will  be  given  in  Chapter  VIII, 
pages  278-319. 

These  facts  clearly  show  us  that  the  condition  of  factory 
hands  was  generally  bad  compared  with  that  of  independenl 

1  Post,  p.  220.  2  Post,  p.  221.  t,  p.  222.  4  Post,  p.  223. 


2l6       ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 

workmen.  Let  us  now  compare  the  price  of  factory  labor 
with  the  prices  of  commodities.  See  Table  VII  at  the  end  of 
this  chapter.1 

As  shown  by  the  figures  given  in  Table  VII,  the  prices 
of  commodities  rose  more  rapidly  than  the  wages  of  factory 
hands.  It  is  obvious  that  the  rise  in  the  prices  of  commodities 
brought  about  a  rise  in  house  rent  and  other  items  concerned 
in  the  cost  of  living,  and  a  consequent  pressure  upon  the  life  of 
the  working  class.  This  wage,  low  compared  with  the  wage  of 
independent  workmen,  which  rose  more  rapidly  than  the 
prices  of  commodities,  made  the  position  of  factory  hands 
very  difficult  during  these  years. 

Let  us  now  investigate  the  number  of  hours  these  factory 
hands  had  to  work  a  day.  In  those  days  we  had  no  factory 
law  in  operation.  Then  again,  factory  owners  were  not 
farsighted  about  the  management  of  their  factories,  nor  did 
they  experience  any  trouble  with  their  factory  hands.  It  is 
obvious  that  the  latter  were  forced  to  work  excessively  long 
hours  a  day  — doubtless  as  much  as  12  or  13  hours,  although 
we  have  no  authentic  statistics  at  hand  to  prove  it.  This  we 
may  infer,  however,  from  the  fact  that  when  a  12-hour  day 
clause  was  inserted  in  the  factory  law  which  was  prepared  in 
quite  recent  years,  objection  was  raised  by  many  of  the 
authorities  best  acquainted  with  the  condition  of  factories  in 
Japan.  As  it  was,  the  appearance  of  the  factory  labor  class, 
which  had  not  existed  in  old  Japan,  presented  a  serious 
question  which  the  leaders  of  the  country  were  called  upon  to 
investigate  from  the  points  of  view  of  social  customs,  public 
sanitation  and  the  preservation  of  the  family  system  in  the 
country.  In  a  word,  it  may  be  stated  that  after  the  Sino- 
Japanese  War,  unusual  activity  was  manifested  in  indus- 
trial circles  in  Japan,  with  a  consequent  heavy  demand  for 
factory  hands.  This  demand  for  factory  labor  brought 
about  in  some  degree  an  increase  in  the  income  of  the  working 
class.  At  the  same  time,  however,  as  there  was  no  factory 
system   established   in   those   days,    the   appearance   of   this 

1  Post,  p.  225. 


EFFECTS   OX    INDUSTRIES  2IJ 

factory  labor  class  encouraged  an  undesirable  tendency  in 
society,  which  should  be  seriously  investigated  in  the  interests 
of  public  sanitation,  health,  and  morality.  In  other  words, 
the  factory  labor  class  is  the  most  interesting  by-production 
of  the  industrial  developments  which  followed  the  Sino- 
Japanese  War.  And  the  appearance  of  this  factory  labor 
class  requires  the  leaders  of  the  country  to  devise  improve- 
ments in  the  factory  system  and  the  condition  of  the  people  of 
this  class,  for  the  sake  of  the  industrial  development  of  the 
country  as  well  as  public  sanitation  and  the  health  of  the 
people  in  general. 


218       ECONOMIC    EFFECTS   OF   THE   SINO-JAPANESE  WAR 


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EFFECTS   ON    INDUSTRIES 


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220       ECONOMIC   EFFECTS    OF   THE    SINO-JAPANESE   WAR 


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EFFECTS   ON    INDUSTRIES 


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222        ECONOMIC    EFFECTS    OF   THE   SINO-JAPANESE    WAR 


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M    M    M    M    M 

CHAPTER  V 

EFFECTS   ON   COMMERCE 

The  ill  effects  that  the  commerce  and  trade  of  Japan  in 
general  suffered  from  the  Sino- Japanese  War  were  compara- 
tively small.  Although  the  interruption  in  transportation  by 
land  and  water  caused  by  the  transporting  of  troops  and 
civilians  in  connection  with  the  war  (amounting  to  300,000) 
interfered  with  the  supply  of  necessary  merchandise  for  a 
short  time,  resulting  in  a  subsequent  rise  in  prices,  yet  these 
difficulties  were  soon  removed;  especially  as  the  government 
paid  careful  attention  to  the  money  market  and  as  conditions 
were  favorable  to  Japan  all  through  the  war,  the  Japanese 
Navy  having  complete  control  over  the  China  Sea.  For  these 
reasons  Japan's  trade  with  America  and  Europe  was  rather 
more  prosperous  than  before  and  trade  with  China  and  Korea 
did  not  suffer  much.  In  order  to  show  the  state  of  commerce 
and  trade  in  general  during  the  war,  we  shall  now  call  atten- 
tion to  the  table  on  the  following  page  which  gives  the  amount 
of  negotiable  paper  handled,  the  notes  cleared,  and  the  present 
general  condition  of  the  country's  foreign  trade  during  these 
years. 

As  we  see  from  the  figures,  neither  the  volume  of  commerce 
at  home  nor  that  of  foreign  trade  decreased ;  indeed  there  was 
more  or  less  increase  in  each  case. 

While  it  is  true,  as  just  stated,  that  during  the  war  no  adverse 
effects  were  suffered  by  trade  in  general,  yet  after  the  war 
important  effects  were  more  apparent.  The  minds  of  the 
Japanese  people  in  general  were  decidedly  stimulated,  for  as 
the  fruits  of  the  war  Japan  obtained  an  indemnity  of  200 
million  taels  in  Chinese  Kuping  silver,  and  the  concession  of 
the  Island  of  Formosa.  Enthusiasm  for  business  enterprises 
speedily  developed  among  the  people,  and  this,  coupled  with 
the  government's  post-bellum  program,  created  unusual  activ- 

224 


EFFECTS   ON    COMMERCE  225 

Negotiable  Paper  and  Foreign  Trade  During  War  Period 


1893 

[894 

1895 

Notes  handled  by  Tokyo 
associated  banks: 
Receipts 

Yen 
71,234,966 
100,467,393 

Yen 

85,203,203 
103,144,795 

Yen 

98,809,120 
137.943.935 

Notes   handled    by    Osaka 
associated  banks: 

44,033,992 
66,320,081 

46,981,007 
82,863,147 

64,438,604 
102,981,074 

Expenditures 

Negotiable   paper  handled 
by     Tokyo     Clearing 
House: 

Amount  presented 

Amount  cleared 

188,591,742 

148,018,870" 

227,767,017 

i85.597,502b 

356,841,068 

289,102,425° 

Negotiable    paper    handled 

by      Osaka    Clearing 
House: 

63,600,661 

67,543,806 

79,654,118 

Foreign  Trade: 
China  and  Korea: 

9,015,663 
19,095,414 

57.933.054 

46,4s  j, 956 

1  1 , 1 79,099 
19,694,820 

7*1,825,062 
67,608,724 

12, 966, 586 
25,910,544 

94.327.59o 
75.543.047 

Europe  and  America: 

Imports 

Total 

177,970,038 

220,728,042 

265,372,754 

»  78. s  per  cent  of  amount  presented.  ;  per  cent  of  amount  presented. 

0  81. 1  per  cent  of  amount  presented. 

ity  in  business.  In  addition  to  the  importation  of  cash  with 
such  great  purchasing  power  as  the  indemnity  from  China, 
there  was  a  large  infirm  of  foreign  capital  as  a  result  of  the 
adoption  of  the  gold  standard  for  the  country's  currency 
system.  Various  kinds  of  enterprises  were  therefore  started 
in  all  parts  of  the  country  and  carried  on  by  means  of  the 
financial  facilities  afforded  by  a  special  form  of  bank,  the 
immovable  property  banks,  which  the  government  insti- 
tuted after  the  war.  These  all  overcame  the  various  diffi- 
culties that  beset  the  money  market  after  the  war,  and, 
without  occasioning  any  serious  hindrance  to  commerce  in 
general,  brought  about  an  entire  change  in  the  conditions 
of  commerce  and  trade  from  those  obtaining  before  the  war. 
16 


226       ECONOMIC   EFFECTS   OF   THE    SINO-JAPANESE   WAR 

Table  I  at  the  end  of  this  chapter1  is  illuminating  in  this 
connection. 

These  statistics  do  not  cover  all  of  the  items  concerned,  yet 
give  some  idea  of  the  general  conditions  of  commerce  and 
trade  after  the  Sino-Japanese  War. 

Let  us  now  investigate  the  subject  of  capital  employed  by 
the  companies  engaged  in  commerce  and  trade  since  1896. 
The  percentage  of  increase  in  the  paid-up  capital  of  these 
companies  was  far  greater  than  that  in  the  capital  of  com- 
panies engaged  in  such  business  as  agriculture,  industry  and 
transportation  by  land  and  water.  And  of  the  various 
branches  of  commerce  and  trade  the  most  highly  developed 
during  these  years  were  money  lending,  warehousing,  in- 
surance, sugar,  fishery  and  marine  products,  raw  cotton, 
cotton  yarn,  raw  silk,  textile  fabrics,  publication  and  sale  of 
books  and  newspapers,  etc.,  timber  and  lumber  trading,  sale 
and  purchase  of  immovables,  and  banking.  Each  of  these 
branches  of  commerce  made  progress  in  consequence  of  the 
general  development  of  the  country  which  followed  the  war. 
Let  us  first  examine  the  outstanding  facts  as  to  the  capital  in- 
vested in  commerce  during  this  period,  as  given  in  Table  II 
at  the  end  of  this  chapter.2 

While  the  figures  just  given  represent  only  a  portion  of  the 
commercial  agencies  in  existence,  yet  from  these  figures  we 
may  judge  the  general  condition  of  commerce  during  these 
years.  To  explain  this  unusually  rapid  development,  we  may 
mention  (1)  the  starting  of  various  sorts  of  enterprises  by  the 
government  as  well  as  private  individuals  after  the  war,  (2) 
the  increase  in  the  purchasing  power  of  the  people,  especially 
the  lower  classes,  resulting  from  the  monetary  gifts  and  other 
payments  made  them  for  their  services  in  the  war,  and  also 
from  the  greater  demand  for  labor  of  this  period.  This 
increase  in  the  people's  purchasing  power  naturally  brought 
about  a  rise  in  the  prices  of  commodities,  and  an  excess  of 
imports  over  exports  in  the  country's  foreign  trade.  In  the 
following  pages  we  shall  further  examine  the  effects  of  the 

1  Post,  p.  239.  2  Post,  p.  240. 


EFFECTS    ON    COM  M  I  k<   I 


227 


war  upon  the  domestic  commerce  and   foreign  trade  of  the 
country. 

Domestic  (  <  >m  m  i  r<  i 
Domestic  commerce  in  general 

That  during  and  after  the  Sino-Japanese  War  domestic 
commerce  in  Japan  did  not  suffer  seriously  in  any  way,  but 
rather  attained  to  a  more  healthy  development,  was  brie  In- 
stated in  the  foregoing  section.  Let  us  now  consider  the  same 
subject  in  a  little  more  detail  and  from  various  points  of  view. 

Let  us,  first  of  all,  note  the  condition  of  the  money  market, 
as  presented  in  Table  III  at  the  end  of  this  chapter.1  The 
figures  show  us  that  as  soon  as  business  began  to  re- 
cover from  the  effects  of  the  war,  the  supply  of  capital  in 
the  market  became  liberal,  which  fact  indicates  the  general 
condition  of  commerce  during  these  years.  Next  let  us 
investigate  the  buying  and  selling  of  merchandise,  which 
always  promptly  reflects  commercial  conditions.  Below  are 
given  statistics  as  to  the  volume  of  goods  carried  by  railways, 
although  the  goods  carried  were  not  for  domestic  commerce 

only. 

Volume  of  Goods  Transported  by  Railways* 


State 
railway  s 

Private 
railway  s 

Total 

Vear 

Tonnage 

I'l-r.  entage  of 
incn 

1893 

1894       

1895    

[896    

1897 

1898 

1899 

1900 

1901 

1902 

1903 

Tons 
1  ,<>;(,  ,(,S(, 
1,018,298 
1  ,  1110,059 
1,266,119 
1,558,194 
1.793,896 

2,391.471 

2,806,560 
J. (..S9.602 

3.1  83,720 
3,492,622 

Tons 
2,41 4.394 
3.265,404 
4.23L353 

5.579.1  12 

7.070,315 
8,122,230 
9,428,563 
1  [,594,960 
1  [,750,150 
[2,938,951 
1  (.,268,690 

Tons 
3,491,083 
4.283,702 

5.33 '.4 1 -1 
6,845,231 
8,628,509 
9,916,]  ji. 
1  1 ,820,03  \ 

1  \.  |"I  ,520 
'   1,409.752 
[6,122,67] 
17.701,312 

100. 0 
122.7 
[52.7 

iwi.  1 
•'17  - 
1  0 
vvS.6 
412.5 
412 
461 
508.8 

Total...  . 

22,347,230 

90,664,122 

1  [3,011,352 

» Prepared  and  published  by  Imperial  <  .ova  anient  Railwaj  - 


1  Post,  p.  241. 


228        ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 

Again  let  us  investigate  those  branches  of  business  upon 
which  a  tax  was  levied  in  accordance  with  the  Business  Tax 
Law1  promulgated  in  March,  1896,  and  enforced  on  January  1 
of  the  following  year.  Since  this  law  has  been  in  force  only 
from  1897,  we  have  no  authentic  materials  for  comparison 
with  conditions  prior  to  that  year,  especially  from  1893  to 
1896,  yet  the  statistics  given  below  doubtless  furnish  materials 
from  which  we  may  ascertain  the  true  condition  of  commerce 
during  these  years.  The  business  tax  of  the  law  referred  to 
was  imposed  upon  24  different  forms  of  business,  but  we  shall 
confine  ourselves  to  the  sale  of  commodities.  The  standards 
for  rating  the  tax  were  three,  viz.,  (a)  the  total  value  of  the 
merchandise  sold  during  the  previous  year,  (b)  the  average 
rent  of  buildings  in  the  previous  year  and  (c)  the  maximum 
number  of  employes  engaged  in  the  business  in  the  year 
previous.  The  figures  are  shown  in  Table  IV  at  the  end  of 
this  chapter.2 

According  to  the  law  referred  to,  the  business  tax  was 
imposed  upon  such  persons,  engaged  in  business,  as  sold 
merchandise  to  the  value  of  1,000  yen  or  more  a  year.  Al- 
though the  law  states  that  the  tax  was  to  be  levied  in  accord- 
ance with  said  triple  standards,  in  reality  it  was  not,  because 
of  the  many  difficulties  attending  the  application  of  such  a 
law.  The  figures  prepared  by  the  tax  collectors  and  given  in 
the  preceding  table  do  not  of  course  indicate  the  total  amount 
of  the  commercial  transactions  of  the  country  during  this 
period,  yet  assuredly  they  do  give  some  idea  of  the  general 
commercial  conditions  of  the  time. 

From  these  it  may  be  inferred  that  the  development  of 
Japanese  commerce  during  said  years  was  comparatively 
great.  Of  course  it  must  be  remembered  that  the  said  business 
tax  was  first  levied  after  the  war,  when  the  country's  commerce 
had  attained  considerable  progress.  While  we  regret  that  we 
have  no  authentic  written  materials  from  which  to  ascertain 
the  state  of  commerce  previous  to  the  war,  especially  during 
the  years  from  1 893-1 896,  and  also  that  we  can  not  give  here 

1  Law  No.  33.  2  Post,  p.  242. 


EFFECTS   ON   COMMERCE  229 

the  exact  commercial  development  that  Japan  made  since  that 
time,  yet  considering  the  economic  development  effected  both 
before  and  after  the  war,  it  is  reasonable  to  infer  that  during 
the  same  period  the  country  made  considerable  progress  in 
commerce,  too. 

Table  V  at  the  end  of  this  chapter1  will  show  the  state  of 
capital  of  the  various  kinds  of  important  commercial  com- 
panies. 

From  the  data  given  above  it  may  be  concluded  that 
during  and  after  the  Sino-Japanese  War,  Japanese  commerce 
did  not  suffer  any  reverses,  but  even  made  some  progress. 

Trade  between  Japan  proper  and  the  colonies 

The  colonial  history  of  Japan  began  with  the  acquisition  of 
Formosa  and  the  Pescadores,  which  were  ceded  to  her  by 
China  as  a  result  of  the  Sino-Japanese  War.  The  area  of  the 
new  possessions  is  2,324.11  square  miles  for  Formosa,  and 
7.99  square  miles  for  the  Pescadores,  making  a  total  of  2,332. x 
square  miles  (391.5  square  ri)  or  about  9.4  per  cent  of  the 
total  area  of  the  Empire  before  the  acquisition  of  these  pos- 
sessions— 24,794.36  square  ri.  These  islands  extend  from 
the  tropical  to  the  sub-tropical  zone,  and  abound  in  valuable 
resources,  especially  in  those  products  in  which  Japan  proper 
is  wanting,  and  thus  their  effect  upon  the  market  in  Japan  is 
favorable  in  many  respects.  Let  us  examine  the  statistics 
relating  to  the  trade  between  Japan  proper  and  Formosa 
since  the  acquisition  of  the  latter  island,  as  given  in  the  table 
on  the  following  page. 

Of  all  the  favorable  effects  that  the  possession  of  the  island 
of  Formosa  has  had  on  domestic  commerce  in  Japan  proper, 
the  most  striking  has  come  from  her  production  of  sugar. 
Before  our  acquisition  of  Formosa,  we  had  to  import  most  of 
the  sugar  consumed  in  our  land  from  foreign  countries,  but 
since  we  acquired  Formosa,  there  had  been  a  gradual  change, 
and  now  Formosa  not  only  supplies  all  the  sugar  consumed  in 
Japan,  but  even  exports  the  excess  of  her  production  to  foreign 

1  Post,  p.  243. 


230       ECONOMIC   EFFECTS    OF   THE    SINO-JAPANESE   WAR 


markets.     The  sugar  industry  in  Formosa  will  be  treated  in 
detail  in  the  following  section. 

Trade  between  Japan  and  Formosa,  i  897-1 903 


Year 

Exports  from  Japan 
proper  to  Formosa 

Imports  into  Japan 
proper  from  Formosa 

Excess  of  ex- 

Value 

Percentage 
of  increase 

Value 

Percentage 
of  increase 

ports  over 
imports 

1897... 

1898.  .  . 

1899.  .. 
1900. .  . 

1901 .  .  . 

1902.  .  . 

1903.  . 

Yen 
3,723J2i 
4,266,768 
8,011,826 
8,439,033 
8,782,258 
9,235,290 
11,194,788 

100. 0 
114. 6 

215. 1 
226.6 
235-8 
248.0 
300.6 

Yen 
2,014,648 
4,142,778 

3,650,475 
4,402,110 

7,345,956 
7,407,498 
9,729,460 

100. 0 
205.6 
181. 2 
218.5 
364.6 
367.6 
482.8 

Yen 
1,619,074 
123,990 

4,36i,35i 
4,036,923 
1,436,302 
1,827,792 
1,465,328 

Foreign  Trade 

General  condition  of  foreign  trade 

As  mentioned  heretofore,  the  Sino-Japanese  War,  in  which 
Japan  won  a  great  victory  over  China,  awakened  the  Japanese 
people  to  a  realization  of  the  striking  progress  which  they  had 
achieved  since  the  time  of  the  Restoration  (1868).  The 
Japanese  so  awakened  strove  for  further  progress  after  the 
war,  and  naturally,  unusual  activity  in  the  economic  world 
followed.  In  consequence,  the  foreign  trade  of  Japan,  of 
which  we  propose  to  treat  in  the  present  section,  could  not 
but  feel  the  effect  of  this  general  tendency.  Before  the  Sino- 
Japanese  War,  foreign  trade  was  quite  insignificant,  but  after 
the  war,  striking  progress  was  made  in  the  volume  of  mer- 
chandise, scope  of  the  market,  and  total  value  of  exports  and 
imports.  The  statistics  given  below  show  the  average  annual 
value  of  exports  and  imports  for  every  five  years  since  the 
first  year  of  Meiji  (1868).  A  glance  at  these  shows  us  that 
during  the  period  from  1868  to  1893,  or  just  before  the  out- 
break of  the  war,  the  largest  annual  figure  for  exports  and 
imports  attained  was  80  million  yen  while  in  most  of  the  years 
of  the  period  it  was  20  or  30  million  yen,  which  means  30  or  40 


EFFECTS   OX    COMMERCE  23I 

per  cent  of  the  value  of  the  trade  in  the  year  1893.  In  none 
of  the  years  of  this  period  did  the  value  of  exports  and  imports 
exceed  100  million  yen,  but  after  the  year  1894  it  exceeded  100 
million  yen  and  in  1897  it  reached  200  million  yen,  creating  a 
record  in  the  trade  history  of  Japan.  See  Table  VI  at  the 
end  of  this  chapter.1 

As  the  figures  in  Table  VI  show,  our  foreign  trade  made 
unusual  progress  after  the  Sino-Japanese  War,  but  that  prog- 
ress can  not  be  regarded  as  accidental.  It  was  a  natural 
outcome  of  the  steady  economic  development  which  had  been 
in  progress  since  some  time  before  the  war,  a  result  of  the 
development  of  the  latent  power  of  the  nation.  The  statis- 
tics in  Table  VII  at  the  end  of  this  chapter2  show  the  state 
of  our  foreign  trade  for  a  period  of  ten  years,  beginning  before 
and  continuing  after  the  war. 

While,  it  may  not  be  correct  to  say  that  increase  in  our 
foreign  trade  after  the  Sino-Japanese  War  was  entirely  brought 
about  by  the  war,  nevertheless,  there  can  be  no  doubt  that  the 
war  marked  a  stage  of  great  development  in  the  economic 
world,  then  just  ready  for  such  development,  and  that  this 
development  brought  about  progress  in  the  foreign  trade  of 
the  country. 

Let  us  now  consider  the  state  of  our  foreign  trade  in  the  ten 
years  following  the  war.  During  that  period  both  exports 
and  imports  increased  about  equally,  as  the  figures  in  Table 
VIII  at  the  end  of  this  chapter8  show;  the  value  of  exports 
was  doubled  in  1898,  and  trebled  in  1902,  while  tin-  import 
trade  advanced  even  faster,  being  doubled  and  trebled  a  year 
or  two  earlier  than  the  export  trade. 

Thus  our  foreign  trade,  as  indicated  by  value  <>l  exports 
and  imports,  advanced  greatly  year  by  year,  especially  after 
the  war.  And  this  progress  was  largely  due  t<>  the  increase  in 
the  national  strength  discernible  during,  and  particularly 
after,  the  war.  Thus  among  the  numerous  causes  which 
brought  about  the  advance  in  foreign  trade,  we  may  mention 
(1)  commercial  activity,  arising  from  the  starting  of  various 

1  Post,  p.  244.  2  Post,  p.  245.  i  Post,  p. 


232        ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 

kinds  of  enterprises  and  development  in  systems  of  trans- 
portation on  both  land  and  water;  (2)  the  importation  of  the 
indemnity  from  China;  (3)  the  opening  to  trade  of  such  ports 
in  China  as  Shashih,  Chungking,  Hangchow,  and  Soochow,  in 
addition  to  those  already  opened  as  a  result  of  a  Sino-Japanese 
peace  treaty;  (4)  increased  demand  for  arms  and  other 
munitions  during  and  after  the  war1;  (5)  the  Japanese  ac- 
quisition of  commercial  supremacy  in  Korea;  (6)  increase  in 
the  income  of  the  people,  especially  those  belonging  to  the 
lower  classes;  (7)  the  reform  in  the  currency  system,  which 
removed  anxiety  caused  by  frequent  fluctuations  in  the  ex- 
change rate,  and  favorably  affected  trade;  (8)  the  abolition  of 
the  export  duty,  which  helped  to  extend  the  market  for  Jap- 
anese goods ;  and  (9)  the  revision  of  commercial  treaties  with 
other  countries,  so  long  desired  by  the  Japanese  Government 
and  people,  which  laid  a  firm  foundation  for  the  future  com- 
mercial development  of  Japan. 

About  the  time  of  the  Sino-Japanese  War,  the  standard  of 
our  currency  system,  as  a  matter  of  fact,  was  silver,  and  we 
suffered  considerably  from  its  steady  depreciation.  Since 
1873  (6th  year  of  Meiji)  the  Powers  one  after  another  adopted 
the  gold  standard  for  their  currency  system,  putting  a  limita- 
tion on  the  making  of  silver  coins,  and  the  price  of  silver 
gradually  fell.  In  the  United  States  attempts  were  made  to 
secure  a  rise  in  the  price  of  silver  by  the  Brand  Silver  Purchase 
Regulations,  1878,  and  the  Sherman  Silver  Purchase  Exten- 
sion Regulations,  1890;  but  the  general  world  tendency  was 
against  silver,  and  the  United  States  Government  abolished 
the  said  silver  purchase  regulations  in  1 893.  India,  too,  stopped 
the  unlimited  coinage  of  silver.  Consequently  the  price  of 
silver  quickly  fell,  and  while  before  1872  it  was  generally 
quoted  at  60  d.,  i.e.,  the  ratio  of  the  value  of  gold  to  that  of 
silver  was  1  to  15^,  it  fell  to  35A  d.  or  1  to  26^  in  1893.  As 
silver  was  practically  the  standard  for  the  Japanese  currency 
system,  the  fall  in  the  prices  of  silver  placed  Japan  in  a  com- 
paratively favorable   position   in   her   trade   relations.     For 

1  Were  needed  after  the  war  for  the  replenishment  of  arsenals,  etc. 


EFFECTS   ON    COMMERCE  233 

the  fall  of  silver  meant  a  fall  in  its  price  as  compared  with  that 
of  gold,  and  thus  Japanese  coins  became  cheaper  than  those  of 
countries  where  gold  was  the  standard.  Now  China  with 
other  Oriental  countries,  which  are  the  principal  markets  for 
Japanese  goods,  adopted  the  silver  standard,  and  thus  Japa- 
nese coins,  in  competition  with  the  coins  of  European  and 
American  countries  with  the  gold  standard  system,  won  in 
these  Oriental  markets,  and  thus  in  the  point  of  export  busi- 
ness in  the  Orient  Japan  was  in  a  better  position  than  any  of 
the  countries  with  the  gold  standard.  Now  the  excess  of  ex- 
ports over  imports  in  Japan's  foreign  trade  during  the  period 
from  1 882-1 889  was  due  to  the  said  condition  of  Japan's  trade 
with  these  Oriental  countries.  On  the  other  hand,  however, 
frequent  fluctuations  in  the  price  of  silver  brought  about  sim- 
ilar fluctuations  in  quotations  on  exchange  rates,  and  caused 
great  anxiety  to  traders,  for  in  the  home  market  any  fall  in 
the  value  of  coins1  means  a  rise  in  the  prices  of  commodities. 
Besides,  increase  in  the  volume  of  currency  in  circulation 
after  the  war  brought  about  a  further  rise  in  the  prices  of 
commodities.  This  created  a  situation  beneficial  to  import 
trade.  Despite  the  benefit  which  the  fall  in  the  price  of  silver 
gave  to  Japan  in  her  trade  with  Oriental  countries,  it  was  not 
easy  to  decide  whether  the  silver  standard  was  advisable  for 
the  country  after  all.  Finally,  the  government,  disregarding 
the  immediate  minor  losses  which  it  might  incur,  adopted  tin- 
gold  standard  on  October  1,  1897.  And  this  reform  to  no 
small  extent  laid  the  foundation  for  the  healthy  progi 
which  the  foreign  trade  of  Japan  has  made  ever  since. 

Something  must  be  said  here  about  the  revision  of  the  rate 
of  import  duty  and  the  abolition  of  the  export  duty.  For- 
merly the  tariff  rates  originated  in  Japan's  treaties  with  dif- 
ferent countries.  Her  first  tariff  rates  were  concluded  with 
five  countries,  viz.,  England,  the  United  States,  France, 
Russia  and  the  Netherlands  in  1858  (5th  year  of  Ansei),  and 
revised  in  1866  (2d  year  of  Keiwo).     According  to  the  treaties 

1  A  fall  in  the  price  of  silver,  when  this  i>  the  material  for  the  unit  coin,  is  always 

accompanied  l>\  a  similar  fall  in  the  unit  of  value. 


234        ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 

concluded  in  1858,  the  export  duty  was  5  per  cent  ad  valorem, 
and  the  import  duty  was  from  35  per  cent  (maximum)  to  5 
per  cent  (minimum) .  In  case  it  was  not  mentioned  specially  in 
treaties,  it  was  decided  at  20  per  cent.  But  after  the  revision 
of  1866,  both  export  and  import  duties  were  each  5  per  cent  ad 
valorem.  The  import  duty  was  imposed  in  accordance  with 
the  prices  of  the  articles  to  be  taxed,  at  the  port  where  they 
were  shipped.  Now  in  those  days  the  Japanese  were  not  very 
familiar  with  the  prices  of  foreign  articles,  so  the  prices  upon 
which  the  import  duty  was  imposed  at  Japanese  ports  were  in 
reality  far  from  the  real  prices  of  these  articles  at  the  port 
whence  they  were  shipped.  So,  although  the  import  duty  was 
fixed  by  treaty  at  5  per  cent  ad  valorem,  in  reality  it  was  in 
most  cases  less  than  1  per  cent  ad  valorem.  During  the  period 
from  1889  to  1899  the  average  rate  of  import  duty  imposed  was 
only  3.985  per  cent.  On  the  other  hand,  articles  exported 
from  Japan  in  those  days  were  not  as  a  rule  special  products  of 
the  country,  so  that  there  was  no  way  of  shifting  the  export 
duty,  and  the  imposition  was  entirely  confined  to  the  Japanese 
exporters.  Thus  before  the  revision  of  1899,  the  Japanese 
tariff  always  benefited  foreign  traders,  but  was  a  bar  to  export 
trade  from  Japan.  So  revision  was  carried  out,  and  the 
revised  tariff  law l  was  promulgated  in  1 897  and  enforced  on 
January  1,  1899.  The  rates  of  duty  upon  taxable  imported 
articles  were  fixed  in  the  revised  law  at  from  5  per  cent  (mini- 
mum) to  40  per  cent  (maximum).  Applying  these  rates  to 
the  articles  imported  during  the  year  1895,  you  will  see  that 
the  rate  of  import  duty  thus  realized  would  be  on  the  average 
12.35  Per  cent.  Apply  again  the  conventional  tariff  rates  in 
the  revised  law  to  those  articles  signified  in  the  treaties 
between  Japan  and  England  or  Germany  for  the  conven- 
tional rates,  and  you  will  get  an  average  rate  of  10.052  per 
cent  for  the  same  year.  Compared  with  the  average  rate  of 
3.98  per  cent  of  import  duty  previous  to  the  revision,  these 
new  rates  are  far  higher.  Then,  on  the  other  hand,  the  export 
duty  was  entirely  abolished  on  July  17,  1899,  and  the  articles 

1  Law  No.  14. 


EFFECTS   ON    COMMERCE  235 

exported  from  Japan  were  freed  from  the  imposition  of  a  duty 
of  3.574  per  cent,  as  the  average  export  duty  was  during  the 
period  from  1889  to  1899.  This  greatly  helped  the  develop- 
ment of  home  industries,  on  the  one  hand,  and,  on  the  other, 
served  to  extend  our  foreign  trade.  .  The  fact  that  our  foreign 
trade  has  made  remarkable  progress  since  about  1899  was 
largely  due  to  the  revision  of  these  import  and  export 
rates. 

Just  here  we  must  say  a  few  words  about  the  successive 
excesses  of  imports  over  exports  in  our  trade  after  the  Sino- 
Japanese  War.  A  glance  at  the  state  of  our  foreign  trade 
since  1893,  just  before  the  war,  shows  that,  except  1894  and 
1895,  each  year  has  so  far  always  seen  an  excess  of  imports 
over  exports.  This  excess  indeed  reached  83  million  yen  in 
1890,  which  was  about  40  per  cent  of  the  total  value  of 
exports.1 

A  glance  at  the  state  of  our  foreign  trade  from  the  first  year 
of  the  Meiji  Era  shows  us  that  up  to  1881  imports  always  ex- 
ceeded exports,  but  in  1882  the  condition  suddenly  changed 
and  exports  exceeded  imports,  and  this  state  continued  till 
1893.  Then,  however,  imports  again  exceeded  exports.  To 
explain  this  balance,  which  has  long  been  in  favor  of  imports 
as  against  exports,  numerous  reasons  may  be  given.  But  first 
of  all  it  may  be  stated  that  the  inconvertible  notes  which  were 
in  circulation  in  Japan  in  the  early  part  of  the  Meiji  Era 
began  to  be  adjusted  in  1881;  in  1886  the  government  es- 
tablished the  convertible  note  system,  and  the  prices  of 
commodities  were  then  brought  to  a  normal  state  in  conse- 
quence. Before  the  revision  of  the  currency  system,  the 
standard  for  Japanese  currency  was  silver,  so  that  any  fall  in 
the  price  of  silver  in  those  days  no  doubl  benefited  exports 
rather  than  imports  in  Japan.  But  after  the  war  tin-  govern- 
ment revised  the  currency  system,  adopting  in  1897  the  gold 
standard.     Thus    she    lost    the    benefit    that    she    had    been 

1  In  1898  the  excess  of  imports  over  exports  reached  about  1 12  million  yen,  but 
this  must  be  regarded  .is  ail  exception,  for  a  large  amounl  of  anticipated  import 
orders  was  received  in  that  year,  in  view  of  the  enforcement  of  the  revised  tariff 

law  in  the  following  year. 


236       ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 

obtaining  from  the  silver  standard,  i.e.,  her  advantage  over 
gold-standard  countries  in  export  trade.  Besides,  she  also 
incurred  losses  and  inconvenience  in  the  silver-standard 
countries  as  well.  Then  the  volume  of  currency  in  circulation, 
which  was  swelling  even. at  the  time  of  the  war,  did  not  de- 
crease, but  rather  increased  after  the  war,  because  of  business 
activity  resulting  from  the  various  enterprises  started  by  both 
government  and  people.  This  increase  in  the  volume  of 
currency  in  circulation  caused  a  considerable  rise  in  the  prices 
of  commodities.  Then  the  receipt  of  the  war  indemnity  from 
China,  the  importation  of  foreign  capital,  and  the  increased 
demands  for  foreign-made  articles,  as  a  result  of  the  advance 
in  the  people's  style  of  living,  brought  a  large  amount  of 
foreign  capital  into  Japan  at  a  time  when  the  country's 
power  of  manufacturing  export  articles  did  not  greatly  in- 
crease. Moreover,  with  the  various  kinds  of  enterprises 
started  both  by  the  government  and  the  people  after  the  war, 
the  country,  which  had  been  exporting  mainly  raw  materials, 
was  now  about  to  become  an  industrial  power.  These  various 
reasons  taken  together  were  responsible  for  the  continuous 
excess  of  imports  over  exports,  which  was  still  a  feature  of  our 
foreign  trade  in  191 5,  when  this  book  was  prepared. 

Having  given,  as  we  believe,  a  true  though  brief  summary 
of  the  condition  of  our  foreign  trade  after  the  Sino- Japanese 
War,  we  shall  now  briefly  investigate  in  the  following  pages 
the  facts  as  to  articles  either  exported  from  or  imported  into 
Japan  in  these  post-bellum  years. 

Commodities  exported  and  imported 

As  already  briefly  stated,  during  the  Sino-Japanese  War  our 
foreign  trade  did  not  suffer  seriously  from  the  war,  but  rather 
made  healthy  progress,  as  the  total  value  of  exports  and 
imports  increased.  Not  only  did  the  commercial  policy  of 
the  government  not  interfere  during  the  war  with  general 
trade  but  in  fact  it  brought  about  some  development  in  our 
trade  with  China  and  Korea,  even  while  the  war  was  in 
progress,  as  the  following  statistics  show : 


EFFECTS    ON    COMMERCE 


237 


Trade  with  China  and  Korea,  1893- 
Exports 

-1895 

China 

Korea 

Year 

Value 

Percentage 

Ratio  to 
the  total 

Value 

Percentage 

Ratio  to 
the  total 

1893 

1894 

1895 

Yen 
7,714,000 
8,814,000 
9,135,000 

100. 0 

114  3 
118. 4 

8.6 
7-8 
6-7 

Yen 
1,301,000 
2,365,000 
3,831,000 

100. 0 
181. 8 
248.5 

1  . 1 
2 . 1 
2.8 

Imports 

1893 

1894 

1895 

17,096,000 
17,512,000 
22,985,000 

100. 0 
102.4 
134  4 

19.4 
14.9 
17.8 

1,999,000 
2,183,000 
2,925,000 

100. 0 
109.7 
146.3 

2-3 

2.3 

Consequently,  Japanese  exports  to  these  countries  were  all 
in  a  favorable  state,  the  principal  of  these  exports  being 
matches,  cotton  yarn  and  cotton  manufactures. 

Scarcely  less  favorable  was  the  state  of  our  trade  with 
Europe  and  America.  With  development  in  our  home  in- 
dustries and  a  better  understanding  of  the  conditions  in 
Japan  compared  with  those  in  European  and  American 
countries,  the  volume  of  our  exports  to  these  countries  in- 
creased. On  the  other  hand,  progress  in  our  home  industries 
and  advance  in  the  standard  of  our  civilization  increased 
the  demands  in  Japan  for  foreign-made  articles,  and  our  im- 
port trade  also  became  very  active  in  consequence. 

The  statistics  for  sundry  exports  and  imports,  whose  value 
reached  about  3  million  yen  each  at  the  end  of  1893,  are  set  out 
in  Tables  IX,  X,  and  XI  at  the  end  of  this  chapter.1 

As  these  tables  show,  the  principal  exports  during  these 
years  were  raw  silk,  tea,  copper,  coal,  matches  and  cotton 
yarn,  while  the  principal  imports  were  raw  cotton,  rice, 
Hour,  kerosene  oil,  iron,  sugar  and  woolen  manufactures.      In 


1  Post,  pp.  247-253. 


2;VS        IXONOMK     I.IM.<   IS    OF    THE    SINO-jAPANESE   WAR 

a  word,  it  may  be  stated  that  the  Japanese  were  buying 
foreign-made  articles  for  their  own  consumption  by  selling 
abroad  raw  materials  or  half-manufactured  articles,  but 
neither  case  includes  these  passing  articles  of  trade. 


EFFECTS    ON    COMMERCE 


239 


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252       ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE    WAR 


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CHAPTER  VI 

EFFECTS   ON  TRANSPORTATION   AND 
COMMUNICATION 

At  the  outbreak  of  the  war  all  the  available  transportation 
facilities  in  Japan,  both  land  and  water,  were  placed  at  the 
disposal  of  the  government  for  the  transport  of  troops  and 
munitions  from  Japan  to  Korea  and  Manchuria,  and,  in 
consequence,  the  general  public  suffered  considerable  in- 
convenience. This  state  of  affairs,  however,  did  not  last  long, 
for  the  authorities  concerned  quickly  adopted  the  necessary 
measures  for  relief;  thus  the  transportation  business  was  soon 
restored  to  its  normal  status,  and  never  since  has  the  general 
public  suffered  such  inconvenience  as  at  the  outbreak  of  the 
war. 

Thus,  except  for  this  short  period,  transportation  business 
in  Japan  was  not  hampered  by  the  war  at  all,  and  all  trans- 
portation facilities,  both  land  and  water,  throughout  the 
Empire,  remained  during  the  war  in  the  condition  as  before  the 
outbreak  of  the  war.  But  after  the  war,  which  ended  in 
Japan's  victory,  a  great  increase  in  activity  was  noted  in 
the  transportation,  as  in  almost  every  other  branch  of  business, 
as  a  result  of  the  great  postbellum  boom  in  industry  and  trade. 
To  meet  this  tendency  toward  expansion,  many  plans  were 
formulated — by  individuals  as  well  as  by  the  government. 
The  latter  planned  for  the  improvement  and  extension  of  the 
railways  and  the  telephone  service,  made  efforts  to  augment 
foreign  trade,  and  subsidized  the  merchant  marine  as  well  as 
the  companies  engaged  in  shipbuilding.  The  government 
raised  the  funds  necessary  for  all  these  measures  by  public 
loans. 

How  remarkable  was  the  progress  Japan  made  in  trans- 
portation after  the  conclusion  of  the  war  in  1896  may  be 
observed  from  the  considerable  increase  in  the  paid-up  capital 

254 


TRANSPORTATION    AND   COMMUNICATION 


255 


of  those  companies  engaged  in  the  transportation  business 
during  the  several  years  following  the  war.  Compared  with 
the  year  1896,  in  which  the  war  was  concluded,  the  paid-up 
capital  of  the  companies  engaged  in  transportation  increased 
by  100  per  cent  in  1900,  and  by  130  per  cent  in  1903,  as  will  be 
seen  in  the  table  below : 

Capital  Investment  in  Transportation  Companies,  1896-1903 


Authorized 
capital 

Paid-up  capital 

No.  of 
companies 

Year 

Amount 

Rate  of 
increase 

Reserve 

1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 

Yen 

171,674.964 
266,973,250 
271,896,976 
269,622,304 
305,810,809 
356,220,426 
361,454,333 
383,422,606 

Yen 

113,216,760 
164,684,165 
197.233.421 
198,146,560 

228,733,512 
243,224,584 
262,676,192 
262,382,936 

100. 0 

145-5 
174.2 
175  0 
202  .0 
214.8 
232.0 
231.7 

Yen 

6,259,011 
6.551.967 
7.302,391 

■s.i  133^4 

14.s77.726 

14,221,810 
18,587,260 
24,004.444 

334 
454 
536 
583 
627 
596 
646 
702 

As  the  table  indicates,  the  authorized  capital  of  these 
companies  increased  by  more  than  100  million  yen  in  the  two 
years  after  the  conclusion  of  the  war,  and  then  by  another  100 
million  yen  in  the  few  years  subsequent.  Especially  notewor- 
thy is  this  rate  of  increase,  secured  by  the  transportation 
companies  during  the  several  years  following  the  war,  when 
compared  with  that  secured  by  companies  engaged  in  agri- 
culture, industry  and  commerce. 

The  extension  of  railways,  those  owned  by  the  government 
as  well  as  private  roads,  and  the  increase  in  the  tonnage  of 
merchantmen  during  these  years  were  also  remarkable,  as  the 
tables  on  the  following  page  indicate. 

Of  the  systems  of  communication,  which  are  under  govern- 
ment control,  the  telephone  service  was  extended  at  an  outlay 
of  13  million  yen. 

The  condition  of  each  of  these  branches  of  business  will  be 
presented  in  the  following  sections. 


256        ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE    WAR 
Extension  of  Railways,  i  893-1903 


Year 


1893 
1894 

1895 
1896 

1897 
1898 
1899 
1900 
1 901 
1902 
1903 


Mileage  of  railways 


Government 


Allies 

558 

58i 

593 

632 

662 

768 

833 

950 

1,060 

1,227 

1.345 


Private 


Miles 
1,381 
1,537 
1,697 
i,875 
2,287 
2,652 
2,806 

2,905 
2,967 

3,on 
3,i5i 


Total 


Miles 

1,939 
2,118 
2,290 
2,507 
2,949 
3,420 
3,639 
3,855 
4,027 

4,238 
4,496 


Rate  of 
extension 


Per  cent 
100.  o 
109.2 
118. 1 
129.3 
152. 1 
176.4 
187.7 
198.8 
207.7 
218.6 
231.9 


Increase  in  Shipping,  1893-1903 


Year 


1893 
1894 

1895 
1896 
1897 
1898 
1899 
1900 
1901 
1902 
1903 


Tonnage  of  merchantmen 


Steamships 


Tons 
104,909 
163,029 
207,765 
227,840 
268,223 

287,857 
308,402 
330,622 

357.394 
376,n8 
408,990 


Sailing 
boats 


Tons 
31,538 
30,178 
27,563 
25,485 
25,768 

139,835 
253,439 
287,568 

307,031 
310,061 

302,783 


Total 


Tons 
136,447 
193,387 
235,328 

253,325 
293,991 
427,692 
561,841 
618,190 
664,425 
686,179 
7ii,773 


Rate  of 
increase 


Per  cent 
100.  o 
I4I-7 
172.5 
185-7 
215-5 
313-4 
411. 8 

453-1 
486.9 

502.9 
5217 


Transportation  by  Land 
The  best  way  to  discover  what  effect  the  war  had  upon 
systems  of  land  transportation  in  Japan,  as  in  the  case  of 
other  branches  of  business,  is  to  note  the  progress  attained  in 
the  following  years.  The  only  means  of  land  transportation 
in  those  days  were  wagons,  rikisha  and  railways  of  various 
kinds.  How  the  paid-up  capital  of  companies  engaged  in 
land  transportation  increased  in  the  several  years  subsequent 


TRANSPORTATION    AND   COMMUNICATION 


257 


to  1896,  the  year  in  which  the  war  was  brought  to  an  end,  may 
be  seen  from  the  table  below: 

Capital   Investment  in  Land  Transportation   Companies,    1 896-1903 


Year 

Steam 
railways 

Electric 
railways 

Railways 
employing 
hand  cars 

Tramways 

Total 

Yen 

Yen 

Yen 

Yen 

Yen 

1896 

90,103,974 

796,827 

90,900,801 

1897 

130,663,015 

44.640 

130,707,655 

1898 

155,881,965 

30,000 

i55,9H,965 

1899 

156,967,016 

42,400 

157,009,416 

1900 

184,201,311 

2,535,534 

254,227 

2,431.972 

189,423,044 

1901 

196,539.372 

5,419,225 

307,391 

1,059,409 

203,325.397 

1902 

212,926,155 

7.158,750 

374.872 

1,058,392 

221,518,169 

1903 

205,319,921 

13,089,005 

451.504 

1,364,544 

220,224,974 

No  other  means  of  land  transportation  was  affected  by 
the  war  as  were  the  railways.  Therefore  it  will  be  sufficient 
to  inquire  into  the  condition  of  the  railways  during  these 
years. 

In  1893,  or  before  the  outbreak  of  the  war,  one-half  of  the 
Japanese  railways  was  under  government,  and  the  other 
half  under  private  management.  The  average  working 
mileage  of  the  government  railways  in  those  days  was  558 
miles  and  the  average  profit  16.91  yen  per  mile  a  day.  The 
private  railways  were  maintained  by  15  different  companies, 
and  the  average  working  mileage  was  1,338  miles.1  Profits 
from  the  railways  under  private  management  were  7.10  yen 
per  mile  a  day;  the  rate  of  profit  reckoned  on  the  paid-up 
capital  was  about  7  per  cent.  Such  was  the  state  of  Japanese 
railways  before  the  war.  In  the  next  ten  years,  however,  the 
working  mileage  of  the  government  railways  increased  to 
1,282  miles,  or  more  than  double  the  total  mileage  in  1893,  and 
these  railways  brought  in  a  profit  of  21.82  yen  per  mile  a  day, 
or  an  increase  of  30  per  cent  over  that  of  1893.  Meanwhile 
the  number  of  railway  companies  had  increased  to  41,  and 
their  total  working  mileage  to  3,070  miles,  or  an  increase  of 

1  The  average  mileage  owned  by  each  of  these  companies  was  89.2  miles,  and  the 
paid-up  capital  36,524  yen  per  mile. 

18 


258        ECONOMIC   EFFECTS   OF   THE   SINO-JAPANESE   WAR 

130  per  cent;  their  daily  profit  also  increased  to  16.91  yen,  or 
1  >v  about  140  per  cent,  compared  with  1 893.  This  profit  means 
9  per  cent  on  the  paid-up  capital  of  67,845  yen  per  mile.  Thus 
ihr  Japanese  railways  made  considerable  progress  both  in 
mileage  and  profits  in  the  ten  years  from  1893  to  1903.  Let 
us  now  make  fuller  inquiries  into  the  condition  of  the  rail- 
ways, both  government  and  private. 

In  1893,  or  before  the  outbreak  of  the  war,  the  Japanese 
Government  possessed  558  miles  of  railway,  mostly  what  may 
1  »e  called  trunk  lines.  This  does  not  imply,  however,  that  the 
Japanese  Government  neglected  the  construction  of  necessary 
railways  in  those  days.  On  the  contrary,  the  government 
promulgated  the  Railway  Construction  Law1  on  June  20, 
1893,  whereby  a  program  was  announced  for  the  construction 
of  railways  in  all  parts  of  the  country.  This  program,  how- 
ever, was  to  be  carried  out  gradually  in  different  periods.  In 
the  first  period,  nine  important  lines  were  to  be  built  at  a 
cost  of  60  million  yen,  to  be  secured  by  a  public  loan.  But  as 
soon  as  this  program,  or  a  portion  of  the  greater  program,  was 
initiated,  the  war  with  China  began,  and  the  government 
naturally  was  compelled  to  suspend  the  work  during  the  war. 
But  Japan  won  the  war,  and  after  peace  was  restored,  the 
Japanese  Government  in  its  postbellum  program,  prepared 
on  a  scale  commensurate  with  the  elevated  position  now 
occupied  by  the  country,  planned  to  improve  the  existing 
government  railway  lines  and  build  new  ones  by  floating 
public  loans  for  this  purpose.  Thus  the  government  agreed 
to  procure  a  loan  of  27,731,331  yen2,  and  of  this  total  amount, 
to  spend  26,553,000  yen  for  improvement  of  the  existing  rail- 
ways under  the  government,  and  1,178,331  yen  for  construction 
of  a  line  between  Sorachita  and  Asahigawa  in  the  Hokkaido. 
The  government  also  agreed  to  build  a  trunk  line  on  the  same 
island  by  raising  a  loan  of  33  million  yen.3  Then  the  govern- 
ment planned  to  build  railway  lines  on  the  island  of  Formosa, 

1  Law  Xo.  4. 

2  Public  Works  Loan  Regulations,  Law  No.  59,  promulgated  March  29,  1896. 

3  Hokkaido  Railway  Construction  Law,  Law  No.  93,  promulgated  March  13, 


TRANSPORTATION   AND   COMMUNICATION  259 

ceded  to  Japan  as  a  result  of  the  war,  at  a  cost  of  28,800,000 
yen,  to  be  defrayed  by  a  portion  of  the  Formosa  Public  Works 
Loan.1  Then,  too,  the  scope  of  the  original  program,  as 
announced  before  the  war,  was  enlarged,  and  the  appropria- 
tion for  the  first  period  increased  from  60  million  yen  to  95 
million  yen  by  Law  No.  19,  promulgated  on  April  2,  1901. 

The  new  lines  thus  planned  and  the  cost  of  their  construction 
were  as  follows: 

Construction  and  Improvement  of  Government  Railways,  1893-19032 

Construction  of  railway  lines,  1 893-1903,  built  with  pro- 
ceeds of  government  railway  loans:  Yen               Yen 

Fukushima-Aomori  line 2°i773i993 

Hachiwoji-Nagoya  line 20,300,532 

Shinonoi-Shiqojiri  line 6,410,865 

Yatsushiro-Kagoshima  line 6,050,676 

Tsuruga-Toyama  line 9,407,302 

Himeji-Sakai  line 5.574-331 

Kaidaichi-Kure  line 2,152,600 

Fukuchiyama-Sonobe-Maizuru  line 1,341,459 

Expenses  for  superintendence 200,019 

72,211,777 

Improvement    of    existing   railways   under   government 

management,  1896-1903,  from  proceeds  of  Government 

Public  Works  Loan: 

Tokaido  line 21,0  (7,422 

Shinyetsu  line 1 ,039,545 

Street  railway  line  in  Tokyo : 2,763,340 

Yokohama  harbor  line 28,41 '  J 

Kobe  harbor  line 7°  1  •  7'  \S 

25,720,476 

Construction   of   railway   line   between    Asahigawa  and 

Sorachita,  Island  of  Hokkaido 1,176,701 

Construction  of  new  lines,  1 896-1903,  from  proceeds  of 

Hokkaido  Railway  Loan 5,889,305 

Construction  of  new  lines,  1899-1903,  from  proceeds  of 

Formosan  Railway  Construction  and  Improvement 

Appropriation 14,894,227 

Total 1 19,892,486 

By  these  means  the  total  mileage  of  the  government 
railway  lines  was  increased  considerably,  as  the  table  given 
below  indicates.     The  increase  is  indeed  remarkable  compared 

with  the  total  mileage  of  558  miles  in  1893.  The  following 
table  gives  the  annual  increase,  for  the  years  1893-190,}.' 

'Formosa  Public  Works  Loan  Law,  Law  No.  75,  promulgated  March  20,  1899. 

2  Fractions  over  5>>  sen  Air  counted  .1-  whole  yen;  fractions  under  ~ 
disregards  I. 

3  Railways  built  in  Formosa  dining  these  years  not  included. 


260       ECONOMIC   EFFECTS    OF   THE    SINO-JAPANESE   WAR 

Miles  Chains 

1893 

1894 23  20 

1895 12  40 

1896 38  40 

1897 30  03 

1898 90  19 

1899 40  29 

1900 72  79 

1901 81  74 

1902 131  °7 

1903 93  42 

Total 613       53 

All  this  extension  of  the  government  railways  was  a  part  of 
the  program  which  the  Japanese  Government,  stimulated  by 
the  war,  had  prepared  to  harmonize  with  the  elevated  position 
assumed  by  the  nation  after  the  Sino- Japanese  War.  Not 
only  was  this  a  direct  effect  of  the  war,  but  there  was  another 
cause  for  this  extension  of  the  railways  in  Japan,  namely, 
the  vast  increase  in  the  number  of  passengers  and  amount  of 
goods  carried  by  train,  due  to  the  increased  activity  in  the 
ecomonic  world  in  Japan  after  the  war.  This  increase  in  both 
passengers  and  goods  naturally  brought  about  a  corresponding 
increase  in  the  profit  from  the  railways.  This  cause  may 
therefore  be  called  an  indirect  effect  of  the  war.  The  number 
of  passengers  and  volume  of  goods  carried,  fare,  gross  returns, 
business  expense,  etc.,  of  the  state  railways  are  given  in  Table 
I  at  the  end  of  this  chapter.1 

The  gross  income,  profit,  etc.,  of  these  government  railways 
also  increased  in  these  years,  as  indicated  in  Table  II  at  the 
end  of  this  chapter.2 

The  progress  of  the  government  railways  during  these  years 
was  remarkable  in  every  respect. 

Let  us  now  look  at  the  extension  of  private  railways  which, 
like  the  extension  of  the  government  railways,  was  carried  out 
on  a  scale  commensurate  with  the  increase  in  economic  activ- 
ities after  the  war.  This  extension  in  the  railways  under 
private  management  was  also  remarkable,  as  the  increase  in 
the  number  of  companies,  their  capital,  working  mileage,  etc., 
given  in  the  following  table  indicates. 

1  Post,  p.  265.  2  Post,  p.  266. 


TRANSPORTATION   AND   COMMUNICATION 
Extension  of  Private  Railways,  1893- 1903 


26l 


Year 

No.  of 
com- 
panies 

Authorized 
capital 

Paid-up 
capital 

Reserve 

fund 

Loans 

Average 
working 
mileage 

1893.- • 
1894..  . 

1895- •■ 
1896..  . 

1897.-. 
1898..  . 
1899.. 
1900..  . 
1901..  . 
1902..  . 
1903-  •  • 

15 
20 
24 
26 
32 
42 
43 
41 
40 
41 
41 

Yen 

63,145,000 

80,290,200 

99,228,000 

120,015,000 

175,396,000 

213,886,150 

227,799,300 

238,042,550 

242,585,000 

251,675,000 

256, 575.°°° 

Yen 

48,869,515 
59,176,637 
71,626,301 
89,010,597 

122,542,091 

153,924.70;, 

i69.9W.444 
181,267,472 
192,811,305 
202,603,626 
208,285,567 

Yen 

517,975 
1,322,085 
1,161,682 

1,587.045 
2,169,267 
2,681,711 
3,374,353 
3.635.854 
4,401,343 
5.155.920 
6,038,419 

Yen 
5,680,000 
5,778,000 
5,552,000 
5,350,000 
5,410,000 

10,174.365 
10,640,400 
11,017,800 
12,839,000 
12,852,600 
18,364,400 

1,338 
1.457 
1,617 
1,698 
2,027 
2,466 

2,725 
2,841 

2,944 
2.978 
3.070 

The  business  of  these  railway  companies  was  stimulated  by 
the  general  activity  in  industry  and  commerce  which  followed 
the  war  and  their  capital  greatly  increased,  as  Table  II  indi- 
cates. Let  us  now  note  the  increase  in  number  of  passengers, 
volume  of  goods,  etc.,  as  given  in  Table  III  at  the  end  of  this 
chapter.1 

The  increase  in  the  number  of  passengers  and  volume  of 
goods  carried  by  these  railways  naturally  brought  about  a 
corresponding  increase  in  the  receipts,  as  shown  in  Table  IV 
at  the  end  of  this  chapter.2 

The  railways  in  Formosa,  which  were  entirely  built  by  the 
Japanese  after  their  acquisition  of  the  island,  as  a  result  of 
this  war,  made  a  very  good  showing  from  the  beginning,  for 
in  a  few  years  after  construction  these  railways  brought  in 
some  profit,  as  Table  V  at  the  end  of  this  chapter 3  shows. 

In  conclusion  it  may  be  stated  that  the  war  did  not  have 
any  direct  effects  upon  or  give  any  marked  stimulus  to 
railway  business  in  Japan;  yet  it  is  true  that  the  railways 
achieved  considerable  progress  in  the  several  years  following 
the  war,  because  of  the  general  awakening  of  the  nation  and 
improvement  in  the  country's  position  brought  about  by  the 
war.  This  progress  made  by  the  railways  may  therefore  be 
said  to  be,  to  no  small  extent,  the  result  of  the  war. 

lPost,  p.  267.  *Post,  p.  268.  lPcst,  p.  y  9 


262     economic  effects  of  the  sino-japanese  war 

Transportation  by  Water 
Merchant  marine 
In  this  section  we  shall  give  an  account  of  the  progress 
attained  by  the  various  organizations  constituting  the  mer- 
chant marine  of  Japan,  during  these  postbellum  years.  At 
the  outbreak  of  the  war,  many  merchantmen  were  transferred 
to  the  government  service  for  the  transport  of  troops  and 
munitions,  and  the  merchant  marine  as  a  whole  was  somewhat 
hampered  in  consequence.  Especially  was  this  the  case  with 
coastwise  navigation.  But  this  temporary  inconvenience  was 
soon  remedied,  for  the  government  quickly  chartered  foreign 
vessels  and  put  them  in  the  places  of  the  replevined.  merchant- 
men. For  the  remainder  of  the  time,  therefore,  the  Japanese 
merchant  marine  did  not  sustain  any  serious  injury  from  the 
war,  but  remained  in  its  normal  condition.  After  the  war, 
the  government,  stimulated  by  victory,  adopted  all  possible 
measures  to  secure  progress  in  the  merchant  marine,  as  in  the 
transportation  systems  on  land.  Help  in  the  form  of  govern- 
ment subsidies  was  given  for  the  construction  of  good  harbors, 
for  instance,  at  Nagasaki  and  Osaka,  so  that  these  places 
might  be  converted  into  good  trading  ports.  The  construc- 
tion of  new  vessels  and  overseas  navigation  were  also  en- 
couraged by  the  aid  of  government  subsidies.  For  the  former 
the  government  promulgated  the  Law  to  Encourage  Ship- 
building l  on  March  24,  1896,  and  for  the  latter  the  Law  to 
Encourage  Overseas  Navigation2  under  the  same  date.  The 
companies  which  enjoyed  state  bounty  in  accordance  with 
the  former  law  were  only  such  as  were  composed  of  Japanese 
subjects,  either  wholly  or  in  part,  engaged  in  the  building  of 
vessels,  and  owning  docks  equipped  as  specified  by  the 
Minister  of  State  for  Communications.3     An  encouragement 

1  Law  No.  16. 

2  Law  No.  15. 

sThe  rate  of  subsidy  given  in  accordance  with  this  law  was  \2  yen  per  ton  of 
gross  tonnage  for  steamers  whose  gross  tonnage  was  between  700  and  1,000  tons; 
and  20  yen  per  ton  of  gross  tonnage  for  those  whose  gross  tonnage  was  1 ,000  tons 
or  over.  In  case  an  engine  also  was  built,  an  additional  subsidy  of  5  yen  per  horse 
power  was  given  for  the  engine. 


TRANSPORTATION   AND   COMMUNICATION  263 

bounty  for  overseas  navigation  was  given  those  individuals 
or  companies  composed  either  wholly  or  in  part  of  Japanese 
subjects  that  with  their  own  steamers,  registered  by  the  Jap- 
anese government,  were  engaged  in  the  transport  of  goods  or 
passengers  from  a  Japanese  port  to  a  foreign  port,  or  from  one 
foreign  port  to  another.1  A  steamer  eligible  to  government 
subsidy  was  to  be  made  of  either  iron  or  steel  materials,  to  be 
the  best  grade  of  steamer,  and  possess  all  the  necessary  quali- 
fications specified  by  the  Minister  of  State  for  Communica- 
tions. In  addition  any  steamer  eligible  for  the  shipbuilding 
encouragement  bounty  was  to  be  of  more  than  700  tons  gross 
tonnage.  And  any  steamer  eligible  for  the  overseas  naviga- 
tion subsidy  was  to  be  more  than  1,000  tons  gross  tonnage, 
and  have  more  than  10  nautical  miles  maximum  rate  of  speed. 
Besides  these  two  forms  of  government  subsidy  for  merchant 
marine,  another  system  was  devised  for  those  steamers 
engaged  in  navigation  service  to  ports  in  America,  Europe 
and  other  foreign  countries.  This  last  form  of  subsidy  was 
inaugurated  because  the  Japanese  Government,  desiring  to 
encourage  the  shipbuilding  industry  at  home,  was  anxious  to 
encourage  overseas  navigation. 

Through  encouragement  from  the  government  and  the 
stimulus  of  the  increased  activity  in  commerce  and  industry 
during  these  post-bellum  years,  the  Japanese  merchant 
marine  made  remarkable  progress  in  the  several  years  follow- 
ing the  war,  as  Table  VI  at  the  end  of  this  chapter-  indicates: 

The  number  of  steamers,  registered  tonnage,  number  of 
passengers,  volume  of  goods  carried,  paid-up  capital,  etc.,  of 
the  three  principal  steamship  companies  in  Japan,  namely,  the 

1  In  the  case  of  a  steamer  whose  gross  tonnage  was  1,000  tons,  and  whose  maxi- 
mum rate  of  speed  was  io  nautical  miles  per  hour,  the  rate  was  25  sen  i>er  ton  of 
gross  tonnage  for  each  1,000  nautical  miles  of  the  voyage.  This  rate  of  subsi.lv 
was  increased  10  per  cent  for  every  500  tons  increase  in  the  gross  tonnage,  and  20 
per  cent  for  every  nautical  mile  of  increase  in  the  maximum  rate  of  speed  per  hour. 
For  steamers  whose  gross  tonnage  was  more  than  6,500  tons,  or  whose  maximum 
rate  of  speed  was  more  than  18  nautical  miles  per  hour,  the  same  subsidy  was 
given  as  for  a  steamer  whose  gross  tonnage  was  6,0(  0  tons,  or  maximum  rate  of 
speed  17  nautical  miles  per  hour.  More  or  less  discrimination  was  made  accord- 
ing to  the  age  or  whether  the  steamer  concerned  was  built  in  Japan  or  abroad. 

2  Post,  p.  270. 


264       ECONOMIC   EFFECTS   OF   THE   SINO-JAPANESE   WAR 

Nippon  Yusen  Kaisha,  the  Osaka  Shosen  Kaisha,  and  the 
Toyo  Kisen  Kaisha  for  the  years  1 893-1 903  are  given  in 
Table  VII  at  the  end  of  this  chapter.1 

Communication 

The  war  did  not  have  any  direct  effect  on  the  systems  of 
communication  in  Japan,  but  after  the  war  the  government  by 
an  appropriation  of  12,802,107  yen  established  new  telephone 
systems  in  Kyoto  and  fourteen  other  large  cities,  and  at  the 
same  time  connected  all  these  important  points  by  telephone 
with  Tokyo  and  Osaka,  the  two  largest  cities  in  the  Empire. 

The  first  telephone  in  Japan  was  established  between  Tokyo 
and  Yokohama  in  1890.  Then  another  line  was  run  between 
Osaka  and  Kobe  two  years  later.  The  fifteen  cities  where 
the  government  established  telephones  as  a  part  of  its  post- 
bellum  program,  at  a  cost  of  12,802,107  yen,  in  the  years  sub- 
sequent to  1896,  were  Kyoto,  Nagasaki,  Niigata,  Nagoya, 
Sendai,  Kanazawa,  Hiroshima,  Akamagaseki  (Shimonoseki) 
Fukuoka,  Moji,  Kumamoto,  Sapporo,  Hakodate,  Otaru  and 
Utsunomiya.  The  appropriation  referred  to  was  apportioned 
as  follows: 


Year 

Annual  appropriation 

Year 

Annual  appropriation 

1896 

Yen 

594.196 

2,473,420 

1,896,119 

1.781,655 

1 900 

Yen 
2,349,786 

1897  .  . 

1901 

1902 

1,807,587 

1898 

1,615,532 

1899 

1903 

268,556 

Further  than  this  there  is  nothing  of  importance  to  state 
about  the  systems  of  communication  in  Japan  in  these  post- 
bellum  years. 

1  Post,  pp.  271,  272. 


TRANSPORTATION    AND   COMMUNICATION 


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266       ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 


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CHAPTER  VII 
EFFECTS   ON   PRIMITIVE   INDUSTRY 

It  may  possibly  be  correct  to  say  that  the  Sino- Japanese 
War  had  little  direct  effect  upon  primitive  industry  in  Japan, 
although  indirect  effects  were  noticeable  here  and  there.  For 
instance,  the  interruption  in  the  transportation  of  general 
merchandise,  both  by  land  and  water,  due  to  the  transporting 
of  troops  and  munitions  at  the  outbreak  of  the  war,  caused  a 
lack  of  balance  between  supply  and  demand  for  the  products 
of  various  branches  of  primitive  industry  in  the  Empire.  In 
consequence  the  prices  of  such  commodities  as  lead  and  other 
contraband,  coal,  provisions,  dried  bonito,  salted  greens, 
pickled  plums,  barley,  soy  beans  and  certain  munitions,  rose 
somewhat. 

It  can  not  be  denied  that  the  rise  in  the  prices  of  these  third- 
class  commodities  in  particular  gave  their  producers — farm- 
ers, mine  owners  and  fishermen — an  opportunity  to  enlarge 
the  scope  of  their  productive  capacity  and  so  to  increase  prof- 
its. The  rise  in  the  prices  of  these  commodities  may  there- 
fore be  regarded  as  an  indirect  effect  of  the  war  upon  primitive 
industry  in  Japan,  but  even  this  was  not  so  great  as  to  be 
worth  special  mention. 

But  the  measures  that  the  Japanese  Government  adopted 
as  a  part  of  its  post-bellum  program  for  the  development  of 
various  branches  of  primitive  industry  are  worth  special 
notice,  although  they,  too,  may  be  called  an  indirect  effect  of 
the  war.  These  measures  included  the  establishment  of  an 
iron  foundry  under  state  management1;  improvement  in  the 
condition  of  rivers  to  secure  better  irrigation;  the  establish- 
ment of  more  agricultural  experiment  stations  and  sericulture] 
training  institutes,  the  enlargement  of  those  already  in  exist- 
ence, etc.  Furthermore,  the  government  established  such 
1  Full  particulars  arc  given  in  Chapter  II. 

19  273 


274        ECONOMIC    EFFECTS   OF   THE    S1N(  )-JAPANESE   WAR 

banking  systems  as  the  Japan  Hypothec  Bank  of  Tokyo,  and 
the  hanks  of  agriculture  and  industry  located  in  various  parts 
of  the  country.  All  these  banks  engaged  in  the  business  of 
lending  money  on  security  furnished  by  real  estate.  These 
banks  were  started  to  give  increased  financial  facilities  to 
farmers,  who  were  suffering  from  the  lack  of  funds  for  their 
work.  Of  course  these  banks  were  imperfectly  adapted  to 
their  purpose  of  developing  the  agricultural  industry  in  Japan; 
especially  in  the  case  of  farmers  with  small  capital  did  they 
prove  defective.  Nevertheless  it  can  not  be  denied  that  these 
banks  gave  an  impetus  to  the  agricultural  industry  and 
practical  assistance  to  farmers.  This  may  be  proved  from 
the  fact  that  the  greater  part  of  the  money  that  the  Japan 
Hypothec  Bank  and  the  banks  of  agriculture  and  industry 
advanced  in  various  parts  of  the  country,  through  the  system 
of  redemption  by  annual  instalments,  was  lent  to  the  irriga- 
tion and  earth-work  guilds,  all  composed  of  farmers,  as  the 
figures  in  Table  I  at  the  end  of  this  chapter1  indicate.  There 
is  no  denying  the  fact  that  they  really  did  benefit  many 
farmers  who  had  been  suffering  from  lack  of  capital  to  carry 
on  their  business. 


Advances  by  Banks  of  Agriculture  and 

Industry,  1898-1903 

Year  a 

To  agri- 
culturists 

To  agri- 
cultural 
companies 

For  adjust- 
ment of 
arable  land 

Total 

Grand  total 

1898 

1899 

1900. . . . 
1901 .... 
1902.  .  .  . 
1903. . . . 

Yen 
2,297,870 

7,163,043 
11,095,842 
13,342,196 

14,931,925 
17,1114,710 

Yen 

18,001 
25,126 

34,595 
58,852 

Yen 

5,270 
4,869 

4,431 
60,241 

Yen 
2,297,870 
7,163,043 
11,119,113 
13,372,191 
i4,97o,95i 
17,313,803 

Yen 
3,687,490 
10,522,750 
16,647,648 

19,994,537 
21,701,288 
24,296,668 

Close  of  year. 


Areas  under  cultivation  in  rice  and  wheat  since  1893, 
showing  the  improvement  effected  by  the  aid  of  the  above- 
mentioned  banks,  are  tabulated  on  the  next  page. 


1  Post,  p.  276. 


EFFECTS   ON    PRIMITIVE    INDUSTRY  275 

Areas  under  Cultivation  in  Rice  and  Wheat,   [893-1903 


Rice 

Wheat 

Year 

Area  under 
cultivation 

Price 
(per  koku) 

Area  under 
cultivation 

Price 
(per  koku) 

1893 

Cho 
2,769,478.9 
2,736,494 -6 
2,784,682.5 
2,792,499.4 
2,787.181.3 
2,817,624.0 
2,839,550-2 
2,828,459.9 
2,847,357  3 
2,847,191  .9 
2,864,139.1 

Yen 
7.08 
8.24 
8.21 
9. 16 
II. 81 

13   11 
9.84 
II.32 
11.47 
12  .07 
13.68 

Cho 

1,744,010.3 
C753.409  -8 
1,774,159.8 
1,767,043.2 

1. 74'). 571- 7 
1,806,667.4 
1,809,822.6 
1,806,668.6 
1,816,200.8 
1,804,938.0 
1,799.346.1 

Yen 

3  T* 

1894 

1895 

3 
3 
3 
4 
6 

4 
4 
4 
4 
6 

75 
80 

1896 

1897 

1898 

57 
88 

04 
46 
74 
07 
45 
[8 

1 899 

1900 

1901 

1902 

1903 

The  areas  under  cultivation  in  rice  and  wheat  as  given  in 
the  foregoing  table  refer  to  the  lands  on  which  rice  or  wheat 
was  actually  raised,  and  not  to  the  entire  area  prepared  for 
cultivation.  Besides,  the  area  of  cultivated  land  changes 
according  to  the  conditions  of  crops  each  year  or  the  price  of 
rice  or  wheat;  therefore  these  figures  can  not  be  accepted  as 
exactly  reflecting  what  these  banks  did  for  the  agricultural 
industry.  Vet  to  some  extent  we  may  see  by  these  figures 
the  progress  made  by  their  aid. 

In  addition,  the  governmenl  established  a  training  school 
to  develop  fishery  experts,  and  adopted  various  other  meas- 
ures to  improve  the  fishing  and  mining  industries.  As  these, 
however,  are  not  worth  special  notice,  we  shall  content  our- 
selves with  a  glance  a1  statistics  regarding  the  paid-up  capital 
of  the  companies  engaged  in  the  agricultural  industry  during 
these  years,  as  shown  in  Table  II  following. 


276       ECONOMIC    EFFECTS   OF   THE   SINO-JAPANESE   WAR 


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EFFECTS   ON    PRIMITIVE    INDUSTRY 


277 


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CHAPTER  VIII 
SOCIAL  EFFECTS 

The  national  life  of  the  Japanese  people  during  the  past 
fifty  years  may  be  divided  into  two  periods,  with  the  Sino- 
Japanese  War  as  the  dividing  point.  In  the  first  period,  that 
is,  from  the  Restoration  of  1868  up  to  the  Sino- Japanese  War, 
we  accomplished,  in  addition  to  the  Restoration  which  re- 
placed the  Shogunate  with  the  Imperial  rule,  the  introduction 
of  a  modern  system  of  administration  in  place  of  the  old  feudal 
methods,  experienced  the  Korean  trouble,  over  which  the 
leaders  of  the  country  differed,  with  a  serious  reflection  on 
home  politics  as  a  result;  and  then  went  through  the  Saigo 
Rebellion  of  1877.  Through  these  events  Japan  accomplished 
great  political  reforms,  her  finances  being  so  much  affected 
thereby  that  the  government  was  obliged  to  issue  inconverti- 
ble bank  notes  to  meet  the  needs  of  the  time.  In  1886,  how- 
ever, the  finances  of  the  country  were  put  right,  and  the  value 
of  paper  money  began  to  assume  a  close  relation  to  that  of 
gold  for  the  first  time  after  many  years  of  financial  chaos. 
On  February  11,  1889,  the  Imperial  Constitution  was  pro- 
mulgated, and  the  Imperial  Diet  was  opened  in  the  following 
year.  The  country  was  then  just  prepared  to  enter  upon  a 
period  of  activity,  both  politically  and  economically,  with  the 
one  great  aim  of  promoting  the  welfare  of  the  nation,  when 
the  Sino- Japanese  War  broke  out. 

Prior  to  this  time,  the  Japanese  had  never  had  any  experi- 
ence with  international  warfare,  in  the  true  sense  of  the  word. 
They  had  had,  it  is  true,  frequent  troubles  with  Korea  and 
Formosa  before  this,  but  these  troubles  could  not  be  called 
international  war  in  the  real  sense  of  those  words.  In  the 
eyes  of  the  Japanese  of  that  time,  therefore,  it  was  a  great 
matter  to  be  at  war  with  China,  the  oldest  and  greatest  coun- 
try in  the  Far  East,  with  a  history  running  back  4,000  years 
into  the  past.  Indeed,  the  Japanese  were  somewhat  appre- 
278 


SOCIAL   EFFECTS 


279 


hensive  as  to  the  outcome.  Fortunately  for  them  they  won, 
and  this  victory  gave  them  the  chance  to  realize  for  the  first 
time  the  superior  ability  which  they  had  been  developing 
since  the  time  of  the  Restoration  in  1868.  "To  manifest  the 
glories  of  the  country  to  the  world,"  was  now  the  banner 
under  which  both  government  and  people  were  determined  to 
carry  out  their  post-bellum  program,  prepared  for  the  purpose 
of  extending  victorious  Japan's  influence.  In  accordance 
with  this  program  the  Japanese  effected  drastic  reforms  in 
their  military  system,  business  methods,  and  machinery  for 
the  promotion  of  culture. 

Simultaneously  the  cost  of  living  went  up,  and  prices  of 
commodities  and  labor  rose  correspondingly.  Development 
in  business  methods  resulted  in  the  concentration  of  capital, 
and  naturally  disturbed  the  balance  in  the  distribution  of 
capital  in  consequence.  The  figures  in  the  table  below  were 
based  upon  the  results  obtained  by  the  commission  appointed 
to  investigate  the  currency  system.  They  tabulated  the 
wholesale  prices  of  about  42  principal  commodities  in  the 


Prices  of  Commodities  in  Japan  from  1873  to   [912 


Year 

Index-numbers 

Year 

Index-numbers 

1873 

100.0 

100  0 

102  .O 

101  O 

I02.0 
I04    O 

109 ,0 

108.0 

103  0 

IOI     O 

103  O 

106  O 
I  IOO 

107  0 
1 09  0 
1 1 5 . 2 

1 1 9 . 2 
122.2 
117  «» 
122.3 

1893 

126. 1 

1874 

1875 

1876 

1877 

1878 

1879 

1880 

1804" 

i8<)5:l 

1896 

1897 

135  8 
143-5 
154  9 
174  1 
182.7 
182.5 
195  2 
[86  3 
182. 1 
195-a 
200 .9 

1898 

1899 

I'JOO 

1881 

1882 

1883 

1884 

1 90 1 

I'll'1 

1903 

1904 

1885 

1886 

1905 

1906 

221   6 

230  3 

248  8 

241   3 

220   1 

1887 

1888 

"'"7 

1908 

1909 

[910 

1 889 

1 890 

1891 

1892 

235  6 
2478 
265    1 

191 1 

1912 

»  War  time. 


280       ECONOMIC   EFFECTS   OF   THE   SINO-JAPANESE   WAR 

city  of  Tokyo,  of  about  16  different  commodities  in  the  city 
of  Osaka  and  of  about  31  principal  articles  of  export  (prices 
at  place  of  export).1  In  addition,  the  results  of  similar  investi- 
gations made  by  the  Bank  of  Japan  concerning  the  prices  of 
about  40  of  the  principal  commodities  in  the  city  of  Tokyo 
were  used.  As  these  figures  indicate,  the  history  of  the  rise 
in  the  prices  of  commodities  in  modern  Japan  may  be  defi- 
nitely divided  into  two  periods,  with  the  Sino-Japanese  War 
as  the  dividing  point.     Each  period  has  its  special  features. 

As  the  figures  in  the  foregoing  table  show,  in  the  twenty- 
one  years  from  1873  to  1893,  the  prices  of  commodities  in 
Japan  rose  26.1  per  cent,  or  approximately  1.3  per  cent  a  year, 
but  during  the  war  with  China  and  in  the  several  years  there- 
after, or  from  1894  to  I9°3>  prices  of  commodities  went  up 
69.1  per  cent,  or  6.9  per  cent  a  year,  and  in  the  nine  years 
from  1904  to  1912,  or  during  the  Russo-Japanese  War  and 
several  years  thereafter,  prices  of  commodities  rose  69.9  per 
cent,  or  7.8  per  cent  a  year.  In  a  word,  the  prices  of  com- 
modities in  Japan  were  rising  approximately  1  per  cent  every 
year  up  to  1896,  but  since  then  they  have  been  rising  7.8  per 
cent  on  an  average  every  year.  These  figures  therefore  denote 
quite  a  revolution  in  the  life  of  the  Japanese  people. 

That  the  prices  of  commodities  have  been  rapidly  rising  in 
Japan  since  1893  has  already  been  stated.  What  were  the 
causes  of  this  rapid  rise?  This  is  a  question  which  has  been 
continuously  investigated  by  government  officials  and  indi- 
vidual experts  ever  since,  but  no  decisive  conclusion  has  yet 
been  reached.  As  I  understand  it,  however,  one  cause  was 
the  disturbance  of  the  balance  between  supply  and  demand, 
especially  in  the  case  of  rice,  resulting  in  a  rise  in  the  price. 
Another  cause  was  a  considerable  increase  in  the  volume  of 
currency  in  circulation,  and  yet  another  was  the  increase  in 
the  taxes,  particularly  taxes  on  consumption.  The  questions 
of  currency  and  the  increase  in  taxes  will  be  dealt  with  later, 
so  we  shall  here  consider  only  the  price  of  rice.  From  time 
immemorial,  Japan  has  been  known  as  a  land  of  rice.     Cer- 

1  All  these  investigations  were  made  from  1872  to  1893. 


SOCIAL   EFFECTS 


28l 


tainly  rice  is  the  staple  food  of  the  country — the  people  in 
general  live  on  rice.1  How  to  keep  the  price  of  rice  normal, 
or  to  adjust  the  changes  in  it,  always  constitutes  the  initial 
problem  in  the  Japanese  Government's  policy  as  to  prices  of 
commodities,  and  even  as  to  economic  affairs  in  general. 
Now  the  price  of  rice  has  been  constantly  rising  since  1893,  so 
great  an  increase  as  90  per  cent  being  observable  in  the  ten 
years  from  1893  to  1903,  as  the  figures  in  the  table  below 
show : 

Average  Price  of  Rice  throughout  Japan,  1893-iw";, 


Year 


Trice  (per  koku) 


Percentage 


1893 
1894 

1895 
1896 

1897 
1898 

1899 
1900 
1901 
1902 
1903 


Yen 

7.08 

8-34 

8.21 

9. 16 

11. 81 

13  11 
9  84 
1132 
11.47 
12.07 
13-68 


100.  o 

117. 8 

115. 9 

12')  4 
166.8 
185.2 
139.0 

159-9 
l62  O 
I7O.4 
193    - 


It  is  a  well-known  principle  that  a  rise  or  fall  in  the  price  of 
a  single  commodity  will  produce  corresponding  changes  in 
other  commodities,  in  the  same  market. 

It  is  obvious,  therefore,  that  a  rise  in  the  price  of  an  impor- 
tant commodity  will  be  accompanied  by  a  similar  rise  in  the 
prices  of  other  commodities  in  one  and  the  same  market. 
Besides  rice,  tobacco,  another  stable  commodity  in  Japan. 
also  rose  in  price,  after  the  government  had  established  its 
monopoly  in  the  manufacture  of  the  article.  This  rise  in  the 
price  of  tobacco  affected  the  prices  of  other  commodities  too. 
Now  concerning  the  rise  in  the  price  of  rice,  it  may  be  stated 
that  the  amount  of  the  rice  crop  each  year  was  partially  re- 
sponsible for  it,  but  the  principal  cause  of  the  rise  in  the  price 


1  Of  the  whole  population  of  Japan,  aboul  70  per  cenl  live  on  rice,  so  far  as  I 
li.i\ e  been  able  to  ascertain. 


282        ECONOMH     EFFECTS   OF   THE   SINO-JAPANESE    WAR 

of  rice  was  the  increase  in  consumption  of  those  living  on  rice 
due  to  the  general  improvement  in  the  standard  of  living  in 
Japan,  and  for  this  the  increase  in  the  income  of  middle  and 
lower-class  people  in  recent  years  has  been  largely  responsible. 
Let  us  look  at  the  ratio  of  prices  of  commodities  and  prices  of 
labor  in  the  two  largest  cities  in  Japan,  namely,  Tokyo  and 
Osaka,  during  these  years,  as  given  in  the  table  below1: 


Year 


Tokyo 


Prices8  Wages 


Osaka 


Prices0         Wagesd 


1893 
1894 

1895 
1896 
1897 
1898 
1899 
1900 
1901 
1902 
1903 


100 
101 
107 
119 
133 
139 
145 
159 
148 

145 
148 


IOO.  o 

109.2 
118. 6 
129. 1 
140.2 
145-8 
147.8 
167.2 
169.7 
170.6 
170.2 


1 00.0 
106.0 
in  .9 
126.7 
144  3 
159-3 

156. 1 

173-7 
173-5 
1730 
181. 8 


IOO  o 

I II  .9 

1323 

141. 7 
161. 6 
168.6 
169.4 
183.6 

179  3 
182.3 
199.0 


•  Average  prices  of  31  different  commodities.       c  Average  prices  of  14  different  commodities. 
b  Average  prices  of  26  different  kinds  of  labor.    d  Average  prices  of  43  different  kinds  of  labor. 

These  figures  speak  eloquently  of  the  growing  increase  in 
the  income  of  middle  and  lower-class  people  in  Japan,  on  the 
one  hand,  and  on  the  other  unmistakably  demonstrate  a 
steady  rise  in  the  price  of  labor  in  the  same  country.  Both 
facts  were  together  responsible  for  the  rise  in  the  prices  of 
commodities  during  these  years. 

Wherever  the  prices  of  commodities  and  labor  rise  so 
quickly,  the  condition  of  society  must  be  far  from  tranquil. 
Now,  from  the  Restoration  of  1868  to  1893, — a  most  eventful 
period  in  Japan's  history,  including  as  it  did  civil  wars  and  a 
financial  crisis, — the  prices  of  commodities  did  not  rise  greatly, 
but  they  rose  steadily  after  the  year  1893.  This  steady  rise 
in  the  prices  of  commodities  could  not  but  reflect  the  uneasy 
current  under  the  surface  of  society  during  those  days. 


1  Based  upon  the  investigations  made  by  the  Finance  Bureau  in  the  Finance 
Department. 


SOCIAL   EFFECTS  283 

The  intervention  of  the  three  Powers,  France,  Germany  and 
Russia,  after  the  Sino-Japanese  War,  which  largely  deprived 
Japan  of  the  fruits  of  her  victory,  seriously  warned  the  Jap- 
anese at  large  as  to  the  probable  future  of  their  country,  and 
they  accordingly  made  up  their  minds  to  carry  out  a  stu- 
pendous post-bellum  program  to  elevate  the  position  of  their 
country  among  the  Powers  of  the  world.  Yet  the  glorious 
victory  with  which  the  Japanese  concluded  the  war,  coupled 
with  their  expectation  of  an  inflow  of  a  large  amount  of  capital 
from  foreign  countries,  because  of  the  large  indemnity  which 
China  was  compelled  to  pay  to  Japan  as  a  result  of  the  war, 
weakened  to  some  extent  the  apprehension  created  by  the 
intervention  of  the  three  Powers  as  to  the  future  of  their 
country.  In  the  financial  world,  in  addition  to  the  govern- 
ment's post-bellum  program,  many  "fake  schemes"  were 
started  by  individual  business  men  for  various  kinds  of  enter- 
prises. In  spite  of  their  rotten  foundations,  these  plans 
worked  smoothly  for  a  while,  and  this  fact  tempted  many 
other  adventurers  to  start  similar  bogus  enterprises.  Thus 
was  initiated  a  tendency  which  became  well-nigh  universal 
in  financial  circles  until  the  whole  of  the  country  was  shocked 
by  the  great  financial  crisis  in  1901.  The  unusual  rise  in  the 
prices  of  commodities  and  labor  in  the  years  following  the 
Sino-Japanese  War,  as  the  figures  in  the  foregoing  table  show, 
was  therefore  nothing  but  a  reflection  of  the  insecure  condition 
of  society  in  those  days,  when  the  majority  of  people  lived  on 
false  pretensions.  Indeed,  it  may  be  stated  that  in  those 
pleasure-seeking  days  the  people  lacked  sincerity  somewhat  in 
their  mode  of  life,  and  that  under  the  surface  of  society  was 
running  an  indeed  dangerous  current. 

For  a  few  years  after  the  Sino-Japatiese  War.  the  Japanese 
people,  like  many  others  in  similar  circumstances,  lived  on 
vaingloriously  on  account  of  their  martial  victory;  yet  they 
recovered  their  senses  again  during  the  great  financial  crisis 
of  1 901,  and  were  able  to  meet  the  Russo-Japanese  War  in 
1904  in  full  preparedness.  All  the  circumstances  attending 
these  events  will  be  further  examined  in  the  following  pages. 


284     economic  ii  i  i  <  is  of  the  sino-japankse  war 

Prices  of  Commodities 

An  inevitable  economic  phenomenon  of  war  is  the  sudden 
rise  in  the  prices  of  commodities  which  takes  place  in  bellig- 
erent countries  after  the  outbreak  of  a  war.  The  Sino- 
Japanese  War  was  no  exception  to  the  rule,  as  the  statistics 
on  prices  of  commodities  in  Japan  during  and  after  the  war 
indicate.  But  in  Japan  except  for  those  commodities  whose 
prices  went  up  either  because  of  interruption  in  the  supply, 
due  to  the  outbreak  of  the  war,  or  on  account  of  shortage  of 
stock,  chiefly  munitions,  prices  did  not  rise  during  the  war, 
but  did  go  up  considerably  after  the  war  was  over.  Thus 
during  the  war  and  approximately  ten  years  following,  the 
wholesale  price  of  the  principal  articles  of  merchandise  in  the 
city  of  Tokyo  rose  about  50  per  cent,  as  indicated  in  Table  I 
at  the  end  of  this  chapter.1 

As  the  statistics  in  Table  I  indicate,  the  degree  of  the  rise 
varies  with  the  three  classes  of  commodities,  namely,  food- 
stuffs, raw  materials  and  manufactures,  but  it  is  true  of  all 
three  classes  that  prices  rose  after  more  than  during  the  war. 
Among  the  reasons  for  this  rise,  we  may  place  the  increase  in 
taxes,  especially  duties  on  consumption,  post-bellum  enter- 
prises carried  out  by  both  government  and  individuals,  in- 
crease in  the  volume  of  currency  in  circulation  resulting  from 
the  business  boom,  and  finally  the  luxurious  mode  of  living  of 
the  people  at  large.  All  these,  which  may  be  called  bad 
effects  of  the  war,  were  responsible  for  the  considerable  rise  in 
the  prices  of  commodities  after  the  Sino- Japanese  War. 

As  already  stated,  a  rise  in  the  prices  of  commodities  in 
these  post-bellum  years  undoubtedly  resulted  from  the  war, 
so  I  shall  now  dwell  in  more  detail  upon  the  effects  of  the  war 
upon  prices  of  commodities  in  the  two  largest  cities,  Tokyo 
and  Osaka. 

The  first  appreciable  effect  of  the  war  was  felt  in  commercial 
circles,  when  the  government  chartered  many  of  the  vessels 
belonging  to  the  Nippon  Yusen  Kaisha  and  other  merchant 

1  Post,  p.  303. 


SOCIAL   EFFECTS  285 

marine  companies,  in  the  latter  part  of  June,  1893,  f°r  the 
transporting  of  troops  and  munitions.  As  this  interruption 
in  transportation  both  by  land  and  water — for  railways,  too, 
were  placed  at  the  government's  disposal  for  the  same  pur- 
pose— came  just  at  the  time  when  the  bulk  of  produce  had  to 
be  marketed,  the  supply  was  suddenly  interrupted,  and  prices 
jumped  up  in  consequence.  Especially  was  such  the  case 
with  munitions.  In  the  early  part  of  the  same  year,  or  at 
least  before  June,  the  rate  of  interest  was  high  and  the  price  of 
silver  rather  low.  From  these  two  causes,  as  well  as  some 
minor  ones,  the  prices  of  commodities  in  general  had  been 
going  up,  and  while  it  may  not  be  correct  to  say  that  the  rise 
in  the  prices  of  commodities  of  that  year  was  entirely  an  effect 
of  the  war,  we  may  safely  say  that  the  war  was  the  principal 
cause.  The  interruption  to  transportation  at  the  outbreak  of 
the  war  without  doubt  brought  about  a  shortage  of  foodstuffs, 
etc.,  in  the  market,  and  merchants  in  anticipation  of  such  a 
shortage  had  bought  up  as  much  as  possible,  without  con- 
sidering whether  the  merchandise  would  sell  well  or  not. 
The  articles  whose  prices  thus  rose  were  salted  greens,  pickled 
plums,  barley,  soy  beans,  etc.  Lead,  which  could  be  bought 
for  6.50  yen  or  6.60  yen  per  100  kin  before  the  war  went  up  to 
10.50  yen  in  September  of  the  same  year,  because,  being  a 
contraband,  its  importation  was  stopped  after  the  out  break 
of  hostilities.  Coal,  too  (best  brand  of  Karatsu  and  Ho- 
chiku),  jumped  up  to  48  yen  in  September,  as  compared  with 
31  yen  or  so  before  the  outbreak  of  the  war.  Provisions  also 
rose  30  or  40  per  cent,  for  they  were  imported  at  Neuchang  and 
Korea  for  the  troops.  But  chinaware,  umbrellas,  silk  fabrics, 
etc.,  which  are  not  daily  necessaries  of  life,  and  also  seaweed, 
trade  in  which  was  interrupted  by  the  outbreak  of  the  war, 
rather  fell  in  price  after  the  outbreak  of  hostilities.  The 
articles  which  were  not  affected  by  the  war  to  any  serious 
degree  were  soy,  bean  paste,  kerosene  oil,  and  articles  ex- 
ported to  Europe  and  America. 

In    May,    1895,    the   Sino-Japanese   War   was   concluded. 
Owing  to  the  intervention  by  the  three  Powers,  Japan  re- 


286        ECONOMIC    EFFECTS   OF    THE    SINO-JAPANESE    WAR 

stored  to  China  the  Liaotung  peninsula,  once  occupied  by  her 
army.  For  a  while  the  Japanese  were  discouraged  by  this 
intervention  but  they  soon  recovered,  and  prepared  for  fresh 
activities  in  business.  Just  at  this  time  the  Bank  of  Japan 
began  lending  out  money  rather  generously  in  business  circles, 
and  the  condition  of  the  country's  foreign  trade  became  very 
encouraging.  The  rice  crop  for  the  same  year  was  very  good. 
Furthermore,  a  large  amount  of  specie  was  brought  to  Japan 
from  abroad  through  China's  payment  of  her  war  indemnity 
and  by  the  improved  condition  of  foreign  trade.  Soldiers  and 
sailors  returned  home  in  triumph  and  were  given  decorations 
and  monetary  gifts  for  their  brave  services  at  the  front. 
These  factors  naturally  had  their  effect  upon  business  through- 
out the  country,  and  prospects  in  general  became  far  better. 
In  addition,  enthusiasm  for  speculative  enterprises  became 
almost  universal  among  business  men,  and  quotations  on 
stocks  and  bonds  went  up  considerably;  the  volume  of  con- 
vertible notes  issued  increased  in  consequence,  as  well  as  loans 
made  by  the  associated  banks  in  Tokyo,  and  the  business 
done  by  the  Tokyo  Clearing  House.  For  these  phenomena 
the  development  of  industry  may  have  been  partly  responsi- 
ble, but  the  principal  cause  was  the  increase  in  the  volume  of 
currency  in  circulation.  If  the  volume  of  currency  increases, 
the  prices  of  commodities  will  assuredly  go  up.  In  1896,  the 
condition  of  the  market  became  depressed,  due  to  the  govern- 
ment's raising  of  the  taxes,  the  bad  condition  of  trade  in  raw 
silk,  cotton  and  tea,  as  well  as  the  poor  rice  crop.  Thus 
during  the  first  half  of  the  year  prices  of  commodities  fell 
somewhat.  But  this  did  not  last  long,  for  the  Bank  of  Japan, 
by  using  the  indemnity  from  China  and  the  increase  in  its 
specie  reserve,  issued  more  convertible  notes,  which  brought 
about  an  increase  in  the  amount  of  bank  notes  in  circulation, 
and  thus  the  prices  of  commodities  went  up  again. 

In  1897  the  amount  of  convertible  notes  issued  continued  to 
increase.  To  make  the  matter  worse  the  price  of  rice  rose, 
and  the  lower-class  people  suffered  accordingly.  In  October 
of  the  same  year  the  government  adopted  the  gold  standard 


SOCIAL    EFFECTS  -N7 

as  the  currency  system  of  the  country,  but  this  change  was  by 
no  means  effective  in  bringing  down  the  prices  of  commodities. 
In  1898  business  in  Japan  suffered  a  great  depression,  owing 
to  the  bad  rice  crop  and  the  tense  condition  of  the  money 
market  then  prevailing.  Prices  of  commodities  rose  accord- 
ingly. In  the  following  year  prices  continued  rising,  and  even 
later  were  rather  on  the  increase,  on  the  whole,  although  not 
without  some  fluctuations  from  time  to  time.  It  was  from 
1902  or  thereabouts  that  business  in  Japan  was  finally  freed 
from  all  effects  of  the  Sino-Japanese  War.  Thus  the  rise  in 
the  prices  of  commodities  during  those  years  was  caused  by 
the  tense  condition  of  the  money  market  and  the  increase  in 
the  volume  of  currency.  And  when  we  see  that  the  Sino- 
Japanese  War  and  the  post-bellum  program  of  enterprises  by 
the  government  and  people  were  entirely  responsible  for  the 
increase  in  the  volume  of  currency,  the  rise  in  the  prices  of 
commodities,  and  later  the  tense  condition  of  the  money 
market,  we  can  not  but  wonder  how  far-reaching  was  the 
effect  of  the  war  upon  the  Japanese  economic  world. 

The  rise  in  the  prices  of  commodities  during  and  after  the 
Sino-Japanese  War  was  principally  due  to  such  general 
causes  as  increase  in  the  volume  of  currency  in  circulation,  the 
tense  condition  of  the  money  market,  and  an  increase  in  the 
purchasing  power  on  the  part  of  the  general  public,  although 
interruption  in  the  supply  of  merchandise  during  the  war  and 
the  raising  of  taxes  after  the  war  may  also  be  mentioned  as 
secondary  causes.  In  the  following  pages  we  shall  first  note 
the  fluctuations  in  the  prices  of  merchandise  in  general,  and 
then  examine  the  case  of  each  class  of  merchandise. 

In  Tables  II-IV  at  the  end  of  this  chapter1  the  index  num- 
bers of  the  annual  average  wholesale  prices  of  merchandise  in 
the  cities  of  Tokyo2  and  Osaka,  the  largest  commercial  city  in 
Japan3,  are  given  for  the  period  1 893-1 903. 

A  comparison  of  these  three  tables  shows  us  that  the  flucl  ua- 
tion  in  prices  of  the  several  commodities  differs  according  to 

1  Post,  pp.  304-310. 

2  Investigations  of  the  Bureau  of  Finance  and  of  the  Bank  of  Japan. 

3  Investigations  of  the  Bureau  of  Finance. 


288         ECONOMIC    EFFECTS    OF    THE    SINO-JAPANESE    WAR 

the  commodity,  location,  etc.  For  instance,  the  rate  of 
increase  in  Osaka  was  greater  than  that  in  Tokyo;  and  in 
Tokyo,  of  the  three  kinds  of  merchandise,  raw  material  rose 
most,  and  foodstuffs  next,  while  manufactured  articles  rose 
least.  However,  generally  speaking,  the  prices  of  these  com- 
modities fluctuated  about  the  same  in  most  cases,  according 
to  the  prevailing  state  of  the  financial  and  economic  market. 
And  when  we  realize  that  it  was  due  to  the  Sino-Japanese  War 
and  its  effects  that  the  financial  market  of  Japan  in  those  years 
was  constantly  disturbed  and  could  not  remain  stable,  we 
must  admit  that  the  war  was  responsible  for  said  fluctuations 
in  the  prices  of  commodities,  especially  for  the  considerable 
rise  noted. 

Let  us  now  study  the  relation  between  the  index  numbers 
for  the  prices  of  commodities  as  given  in  the  above-mentioned 
Tables  II-IV  and  the  percentage  of  the  volume  of  currency 
in  circulation,  as  well  as  the  amount  of  bank  notes  in  circula- 
tion, as  given  in  Table  V  at  the  end  of  this  chapter.1 

As  the  foregoing  statistics  indicate,  the  prices  of  commod- 
ities rose  during  those  years  which  saw  the  volume  of  cur- 
rency in  circulation  increased,  or  in  the  years  following. 
Such  being  the  case,  the  increase  in  the  volume  of  currency  in 
circulation  in  the  years  following  the  Sino-Japanese  War  was 
responsible,  we  may  conclude,  for  the  rise  in  the  prices  of  com- 
modities during  those  years.  But  as  it  may  be  premature  to 
draw  such  conclusions  from  investigations  covering  a  period 
of  only  a  little  more  than  ten  years,  I  will  give  below  the 
results  of  my  investigations  as  to  prices  of  commodities  and 
percentage  of  currency  in  circulation  during  the  period  from 
1887  to  1911. 

These  results  of  investigations  covering  twenty- five  years 
simply  confirm  my  former  conclusion.  Such  being  the  case, 
it  is  not  too  much  to  say  that  the  rise  in  the  prices  of  com- 
modities in  the  several  years  following  the  Sino-Japanese  War 
was  caused  by  the  increase  in  the  amount  of  currency  in  circu- 
lation due  to  the  post-bellum  financial  and  economic  program. 

1Post,  p.  311. 


SOCIAL   EFFECTS 


289 


Comparison   of   Prices   of   Commodities   and   Currency   in    Circulation, 

1887-1911 


1887. 
1888. 
1889. 
1890. 
1891. 
1892. 

1893- 
1894. 

1895- 
1896. 

1897- 
1898. 
1899. 
1900. 

1901 . 

1902 . 

1903- 
1904. 

1905 

1906. 

1907. 

1908. 

1909. 

1910. 

191 1 . 


Year 


Index  number  for 
prices  of  commodities 


102. 1 

107.9 

in. 7 

1x4.4 

1 10  4« 

1 14.6 

118. 1 

127.2 

134  4 

145   1 
163. 1 

171. 1 

170.9s 
182.8 

174 -5" 
170.6s 
182.8 

193  7 
213.6 

215-7 

233  -o 
226.0s 

214.6s 

220.7 

232.1 

Percentage 

of  cur- 

rency 

in  circulation 

(1 

886  = 

00) 

100. 

8 

105. 

2 

in 

0 

103. 

4s 

106. 

2 

109. 

2 

120. 

1 

124 

8 

142 

0 

151 

3 

166 

4 

143 

8s 

169 

6 

160 

2s 

154 

5a 

164 

5 

166 

8 

196 

0 

214 

3 

239 

.2 

256 

.  1 

254 

5' 

257 

.8 

286 

9 

306 

3 

Decrease,  as  compared  with  previous  year. 


After  the  Sino-Japanese  War,  the  Japanese  Government 
raised  the  taxes  on  consumption  of  sake,  tobacco,  soy,  etc.,  in 
order  to  meet  her  financial  needs  following  the  war.  Let  us 
look  at  the  changes  in  the  rate  of  these  taxes. 

(A)  The  tax  imposed  upon  sake  in  general  varies  according 
to  the  brand,  and  is  very  complicated  compared  with  similar 
impositions  on  other  articles.  We  shall  therefore  here  examine 
the  rate  for  the  consumption  tax  upon  refined  sake  (seishu) 
only.  The  rate  imposed  upon  this  brand  of  sake  was  4  yen 
per  koku  annually  in  1893,  the  rate  having  been  decided  in 
accordance  with  Order  No.  61,  issued  in  1882,  but  it  was 
raised  to  7  yen  per  koku  in  October,  1896,  to  12  yen  per  koku 
in  January,  1899,  and  to  15  yen  in  1901. 

(B)  The  rate  imposed  upon  soy  was  at  first  1  yen  per  koku 


29O        ECONOMIC    EFFECTS  O]      NIK    SINO- JAPANESE   WAR 

a  year  in  accordance  with  Order  No.  10,  issued  in  May,  1885, 
bill  it  was  doubled  on  March  1,  1899. 

(C)  The  imposition  upon  tobacco  was  a  stamp  duty  of  20 
per  cent  ad  valorem  from  July  1,  1888,  until  the  manufacture 
of  tobacco  was  monopolized  by  the  government  on  January 
1,  1898.  After  the  business  was  brought  under  government 
management,  returns  from  the  business  were  at  first  84  per 
cent  compared  with  the  price  for  which  the  government  bought 
the  business  from  individual  concerns.  The  rate  became  100 
per  cent  from  July,  1898,  to  August,  1900,  130  per  cent  from 
August  22  of  the  same  year,  150  per  cent  in  1901,  and  it  was 
quoted  between  140  and  180  per  cent,  according  to  grade  of 
tobacco,  in  1902.  The  net  profit  of  the  government  from  its 
tobacco  monopoly,  or  rate  of  income  as  compared  with  the 
purchasing  price  of  the  business  from  individual  concerns, 
was  77.9  per  cent  in  the  fiscal  year  1897  (from  January  to 
March) ;  86.2  per  cent  in  1898;  94.0  per  cent  in  1899;  88.1  per 
cent  in  1900;  158.8  per  cent  in  1901;  178.8  per  cent  in  1902; 
and  152.9  per  cent  in  1903. 

The  raising  of  the  tariff  rate  by  the  government  should  also 
be  noted  in  connection  with  the  rise  in  prices  of  commodities 
during  these  years.  In  1897  the  Japanese  Government  pro- 
mulgated its  customs  tariff  law1,  which  took  effect  from 
January  1,  1899.  According  to  this  tariff  law,  the  taxable 
articles  in  Class  No.  1  were  497,  divided  into  16  groups. 
These  articles- were  subjected  to  the  imposition  of  a  tax  from 
the  minimum  rate  of  5  per  cent  up  to  the  maximum  rate  of 
40  per  cent.  By  applying  these  rates  of  duty  to  the  articles 
imported  into  Japan  from  abroad  during  the  year  1895,  we 
get  an  average  rate  of  duty  of  12.3  per  cent.  But  as  Japan 
has  a  conventional  tariff  contract  (treaty)  with  England, 
France,  Germany  and  Austria,  this  treaty  too  must  be  taken 
into  consideration.  Even  in  that  case  the  average  rate  of 
duty  was  10.52  per  cent.  Previous  to  the  promulgation  of 
the  said  tariff  law,  the  average  rate  of  customs  duty  in  Japan 
was  3.57  per  cent.     The  following  statistics  show  the  relation 

1  Law  Xo.  14. 


SOCIAL   EFFECTS 


29I 


between  the  amount  of  the  government's  income  from  cus- 
toms duties  and  the  prices  of  the  imported  articles  upon  which 
duty  was  levied,  for  twenty  years  from  [889.  As  the  figures 
below  indicate,  the  average  rate  of  tariff  duty  in  Japan  was 
3.89  per  cent  for  the  ten  years  previous  to  the  promulgation 
of  the  said  tariff  law,  that  is,  from  1889,  but  it  increased  to 
11.37  Per  cent  for  the  ten  years  1899-1908  which  followed  the 
promulgation  of  the  said  law. 

Revenue  from  Customs  Di  cies,  [889  1908 


Year 


Rel  urns  from 
import  duty 


Value  of  imported 

article  s,  upon  which 
<lut  v  was  1<  \  it'l 


Rate  of 
customs  duty 


1889 
1890 
1891 
1892 

1893 
1894 

1895 
1896 

1897 
1898 
1899 
1900 
1901 
1902 
1903 
1904 

1905 
1906 
1907 
1908 


Yen 

2,863,576 
2,932,637 
2,401,238 

2,745.777 
3,098,627 
3,506,500 
4,238,842 
4,915,289 

5.295.123 
6,280,620 

13.251,833 
16,764,165 
14,457,526 
14,727,596 
16,372,024 
20,519,938 
34,298,519 
41,230,391 
^,959,596 
+4.817.856 


Yen 

63.403,345 

65,795.098 

54,822,790 

6  i,J')9,862 

79,462,140 

103,195,819 

118,680,124 

130,431,094 

139,975.246 

165,522,430 

136,489,625 

200,458,007 

165,214.574 

151,037,567 

l68,547.3'»7 

208,450,952 

294,268,906 

281,337,980 

307,358,291 

281,399,648 


Per  cent 


52 

4" 
38 

27 
89 

4" 

57 

77 
78 
80 

7i 
36 
75 
75 
7i 
84 
66 
66 
28 
93 


■  Mew  tariff  enforced. 

As  the  foregoing  figures  indicate'  there  can  be  no  doubt  that 
the  raising  of  the  rate  of  import  duty  influenced  the  prices 
of  commodities  in  Japan  during  these  years. 

The  imposition  of  a  consumption  tax  upon  merchandise 
brings  about  a  rise  in  the  price  of  that  merchandise  of  approx- 
imately the  same  amount,  either  more  or  less,  according  to 
circumstances.  Then  a  rise  in  the  price  of  one  article  in- 
fluences the  prices  of  other  articles  which  have  relations  with 
that  article  in  the  same  market.     Therefore  it  may  be  -land 


292        ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 

that  the  raising  of  the  duty  on  consumption  was  the  principal 
factor  in  causing  the  rise  in  the  prices  of  commodities  during 
these  years  in  Japan. 


Prices  of  Labor 

As  stated  heretofore,  the  price  of  labor  always  rises  more 
rapidly  and  to  a  greater  degree  than  the  prices  of  commodities 
in  Japan,  as  the  prices  of  labor  and  commodities  during  these 
years  in  the  two  largest  cities  in  the  country,  Tokyo  and 
Osaka,  as  given  in  the  table  below,  indicate : 

Prices  of  Labor  and  Commodities  in  Tokyo  and  Osaka,  1893-1910* 


Year 


1893 
1898 
1903 
1908 
1909 
1910 


Tokyo 


Labor 


100.  o 
145.8 
170.2 
196. 1 
193  9 
196.5 


Com- 
modities 


100. 0 
139-5 
148.5 
186.0 
176.7 
180.9 


Rice 


100 
200 
176 
213 
178 
179 


Osaka 


Labor 


100.  o 
168.6 
199.0 
279.0 
268.6 
274.4 


Com- 
modities 


100. 0 
159-5 
185.3 

224. 1 
217.7 
220.2 


Rice 


100. 0 
196.4 

194. 1 
212  .0 
173-7 
1763 


»For  particulars  of  the  foregoing  figures,  the  previous  section  as  well  as  statements  that  will  be 
given  later  on  the  same  subject  are  referred  to.  But  as  the  figures  for  the  years  1908  and  beyond 
have  been  prepared  especially  for  the  above  table,  no  further  explanation  of  them  will  be  given. 

From  the  foregoing  statistics  it  may  be  seen  that  the  prices 
of  labor  always  rose  higher  than  the  prices  of  commodities, 
especially  rice.  But  we  must  first  examine  what  changes  the 
price  of  labor  has  passed  through  since  the  Restoration  of 
1868,  and  then  we  can  see  what  effect  the  war  had  upon  the 
prices  of  labor  in  general. 

The  table  on  the  next  page,  prepared  by  the  Bank  of  Japan, 
gives  a  view  of  the  prices  of  24  kinds  of  labor  in  the  city  of 
Tokyo  from  1873  to  1910. 

As  these  figures  indicate,  the  price  of  labor  did  not  rise 
at  all  rapidly,  from  1873  to  1893,  or  before  the  outbreak 
of  the  Sino-Japanese  War,  but  after  that  war  it  sud- 
denly   rose    considerably.     After   the    Russo-Japanese   War 


SOCIAL   EFFECTS 
Price  of  Labor  in  Tokyo,  1873-1910 


293 


1873 
1874 

1875 
1876 

1877 
1878 
1870 
1880 
1881 
1882 
1883 
1884 
1885 
1886 
1887 
1888 
1889 
1890 
1891 


Price  of  labor 


100.00 
102.80 
101.95 
101.25 
1 04 . 46 
109.88 
116. 17 
125.92 
127.58 
129.96 
130.58 
126.03 
127.29 
127.38 
126.42 
126.63 

125.79 
123.17 
121 .29 


Year 


1892 

1893 
1894 

1895 
1896 
1897 
1898 
1899 
1900 
1901 
1902 
1903 
1904 

1905 
1906 
1907 
1908 
1909 
1910 


Price  of  labor 


124 

124 
135 
152 
158 
166 
179 
185 
194 
203 
200 
200 
201 
210 
219 
225 
237 
233 
224 


"4 
92 
25 

00 

29 

;* 

75 
43 
38 

17 
08 

50 
38 

29 

9] 

32 

54 

92 

54 


( 1 904-1 905),  the  price  of  labor  did  not  rise  so  rapidly  as 
it  did  after  the  Sino-Japanese  War.  It  may  he  seen, 
therefore,  that  the  changing  conditions  in  the  economic 
world  following  the  Sino-Japanese  War  affected  the  price 
of  labor,  too,  for  the  great  activity  prevailing  during 
those  years  in  economic  circles  increased  the  income  of 
the  people  at  large,  and  brought  about  a  rise  in  the  people's 
standard  of  living.  The  increase  in  the  cost  of  living 
thus  brought  about,  naturally  caused  a  rise  in  the  price  of 
labor. 

Let  us  further  examine  the  relative  prices  of  labor  in  both 
Tokyo  and  Osaka,  as  investigated  by  the  Finance  Bureau  of 
the  Department  of  Finance  as  well  as  by  the  Bank  of  Japan 
for  these  years.  Particulars  are  given  in  Tables  VI,  VII,  and 
VIII  at  the  end  of  this  chapter.1 

As  the  figures  in  these  tables  show,  the  prices  of  labor 
during  the  years  specified  advanced  6  or  7  per  cent  a  year. 
What  relation  the  price  of  labor  has  to  the  prices  of  commod- 
ities will  be  discussed  in  the  next  section. 


1  Post,  p.  312-315. 


2^4       ECONOMIC    EFFECTS   OF  TIN'.    SINO-JAPANESE    WAR 
Prices  of  Labor  in  Tokyo  and  Osaka,  i  893-1903 


Yi  ar 

In  Tokyo 

(of  26  kinds 

of  labor)" 

In  Osaka 

(of  43  kinds 
of  labor)" 

In  Tokyo 

(of  24  kinds 
of  labor)b 

Average 

Rate  of  in- 
crease com- 
pared with 
previous  year 

1893 

i8<)4 

1895 

1896 

1897 

1898 

1899 

1900 

1901 

1902 

1903 

100. 0 
109.2 
118. 6 

129. 1 
140.2 
145-8 
147.8 
167.2 
169.7 
170.6 
170.2 

100. 0 
in  .9 
132  3 
I4I-7 
161. 6 
168.6 
169.4 
183.6 

179-3 
182.3 
199.0 

100. 0 
108.3 
121 .7 
126.7 
133-3 
143-9 
148.4 
155-6 
162.6 
160.2 
160.5 

100. 0 
109.8 
124.2 
132.5 
I45-0 
1528 
155-2 
168.8 

170.5 
171 .0 
176.6 

9 
14 

8 
12 

7 
2 

13 
1 
0 

5 

8 
4 
3 
5 
8 

4 
6 

7 
5 
6 

7-7c 

As  investigated  by  Finance  Department.         b  As  investigated  by  Bank  of  Japan. 
cAverage. 


Prices  and  Incomes 

Since  1893,  the  prices  of  labor  have  fluctuated  to  a  far 
greater  extent  than  the  prices  of  commodities  in  Japan,  as 
was  briefly  stated  in  the  foregoing  sections.     The  following 

Fluctuations  in  Prices  of  Labor  and  Commodities,  1893-1903  " 


Year 


1893 
1894 

1895 
1896 

1897 
1898 
1899 
1900 
1901 
1902 
1903 


Prices  of 
commodities 


100.  o 
105.0 
in  .0 
123. 1 
138.8 
147-9 
148.8 
162.7 
156.4 
154-2 
161 .7 


Prices  of 
labor 


100.  o 
109.8 
124.2 

132.5 
I45-0 
152.8 
155-2 
168.8 

170.5 
171 .0 
176.6 


Excess  of  rise  in  prices 
of  labor  over  rise  in 
prices  of  commodities 


4.8 
13.2 

9-4 
6.2 

4-9 
6.4 

6.1 
14. 1 
16.8 
14.9 


•  Figures  for  prices  of  commodities  given  in  the  above  table  are  the  average  prices  of  31  different 
commodities  in  Tokyo  and  13  commodities  in  Osaka,  as  investigated  by  the  Finance  Bureau,  and 
of  40  commodities  in  Tokyo,  as  investigated  by  the  Bank  of  Japan.  Details  as  to  these  figures 
were  given  under  "  Prices  of  Commodities,"  p.  284.  Figures  for  the  prices  of  labor  are  the  average 
prices  of  26  kinds  of  labor  in  Tokyo,  as  prepared  by  the  Finance  Bureau,  and  of  24  kinds  of  labor 
in  Tokyo  and  43  kinds  of  labor  in  Osaka,  as  prepared  by  the  Bank  of  Japan. 


SOCIAL   EFFECTS 


295 


statistics,  prepared  by  the  Finance  Bureau  of  the  Department 
of  Finance  and  by  the  Bank  of  Japan,  give  the  ratio  of  the 
fluctuation  in  the  prices  of  labor  to  that  in  the  prices  of  com- 
modities in  the  cities  of  Tokyo  and  Osaka. 

As  the  figures  in  the  foregoing  table  indicate,  there  is  little 
doubt  that  the  increase  in  the  income  of  the  working  people 
of  Japan  during  the  years  specified  was  proportionately 
greater  than  that  in  the  prices  of  commodities. 

The  income  of  a  laborer  belonging  to  the  class  referred 
to  is  generally  30  or  40  sen  a  day,  the  highest  not  exceeding  95 
sen.  The  annual  income,  therefore,  must  be  less  than  300 
yen.  A  man  of  this  rating  certainly  belongs  to  a  financially 
low  class  in  society.  We  must  therefore  examine  the  incomes 
of  the  middle  and  higher  classes.  Now  as  the  people  belong- 
ing to  these  classes  pay  an  income  tax,  we  may  determine 
their  income  by  studying  income-tax  statistics.  The  fol- 
lowing table  shows  the  number  of  people  paying  the  third- 
class  income  tax  and  their  income:1 


Incomes 

and  Income 

Taxes, 

1 893-1903 

Amount 

Index 

Year 

No.  of 

Per- 

Total 

Per- 

of in- 

IV, 

numbers 

for  prices 
of  com- 

tax- 
payers 

centage 

income 

centage 

come 
per  tax- 

centage 

pa}  1  1 

modities 

Yen 

Yen 

1893. ... 

124,077 

100. 0 

9i.3i3,447 

100. 0 

736 

100. 0 

100.0 

1894.  .  .. 

129,327 

104.2 

99,  470,716 

108 

9 

769 

104  5 

105.0 

1895      .. 

134.732 

108.6 

107,553.679 

117 

8 

798 

[08    1 

1 1 1 .0 

1896. .  .  . 

151.041 

121 .7 

127,201), 728 

139 

4 

843 

■  1  )  5 

[23  I 

1897.... 

172,764 

139.3 

147,671.. 5  1) 

161 

7 

855 

[  1 6  2 

138.8 

1898. . . . 

I95i292 

157  4 

I  liN, 480,424 

184 

5 

[1 7. 2 

147  9 

1899. ... 

342,721 

276.2 

204,1  17,466 

237 

4 

633 

86.0 

[48.8 

1900. . . . 

43L378 

347  7 

253.251.341 

291 

7 

617 

83.8 

[62.7 

1 901 

510,779 

411. 7 

29]  , -\S6,2I3 

33  1 

9 

599 

81    1 

156.4 

1902 .  .  .  . 

580,849 

468.1 

326,230,305 

373 

8 

79  9 

1 54  •  2 

1903. 

548.976 

523 .0 

366,931,266 

420.7 

592 

80   1 

161  7 

1  The  income  t.i\  of  I  his  class  is  |<\  ied  Oil  their  individual  incomes,  alter  intl 

on  public  bonds  or  debentures  belonging  to  them  lias  been  subtracted.     In  other 

words,  it  is  levied  on  all  incomes  excepl  those  of  legal  persons,  or  t  hose  which  accrue 
from  interest  on  public  bonds  or  debentures  payable  in  the  territories  of  Japan 
where  the  income  tax  law  is  effective. 


296       ECONOMIC    EFFECTS   OF   THE   SINO-JAPANESE   WAR 

As  the  above  figures  indicate,  the  number  of  taxpayers 
belonging  to  this  class  steadily  increased  and  in  1903  became 
about  five  times  as  great  as  in  1893.  But  disregarding  the 
number,  and  considering  the  taxpayers  of  this  class  as  a  body, 
we  see  that  the  rate  of  increase  in  their  aggregated  incomes 
closely  corresponds  to  the  rate  of  increase  in  the  prices  of 
commodities  during  these  years.  The  increase  in  the  number 
of  taxpayers  and  decrease  in  the  amount  of  income  per  tax- 
payer are  phenomena  arising  from  the  revision  of  the  Income 
Tax  Law,  and  from  a  stricter  enforcement  of  the  law,  so 
nobody  will  contradict  us  if  we  say  that  these  phenomena  do 
not  necessarily  indicate  a  decrease  in  the  aggregate  income  of 
the  Japanese  people  at  large.  In  a  word,  as  the  entire  income 
of  any  one  class  in  society  is  the  collective  income  of  the  tax- 
payers in  that  society,  it  is  not  improper  to  compare  the 
fluctuations  in  the  total  income  of  a  country  with  the  index 
number  of  price.  But  in  this  connection  a  few  points  must 
be  borne  in  mind.  (1)  Excepting  those  who  receive  a  stated 
income  from  their  earnings,  there  may  be  many  who  do  not 
report  their  entire  incomes  correctly  and  strictly  to  the  govern- 
ment. (2)  As  a  result  of  the  revision  of  the  Income  Tax 
Law  in  1899,  the  method  of  deciding  as  to  taxpayers  and  of 
estimating  the  amount  of  individual  incomes  was  somewhat 
changed.  For  instance,  before  the  said  revision,  permanent 
residents  only  paid  an  income  tax,  but  after  the  revision,  the 
tax  was  obligatory  not  only  upon  permanent  residents,  but 
also  upon  those  who  reside  in  one  place  for  more  than  a  year, 
and  also  upon  those  who  merely  own  property,  or  have  busi- 
ness interests,  or  carry  on  their  occupations  in  any  place  where 
this  income  tax  law  is  effective.  Again,  before  the  said 
revision,  the  taxable  income  of  each  individual  taxpayer 
included  the  whole  of  his  income,  but  after  the  revision 
incomes  were  divided  into  three  classes:  (1)  income  of  legal 
persons,  (2)  income  from  interest  on  public  bonds  or  deben- 
tures, and  (3)  income  of  individuals.  From  the  income  of 
individuals  was  subtracted  that  part,  if  any  such  there  were, 
as  certain  shares  of  legal  persons,  upon  which  the  income  tax 


SOCIAL   EFFECTS  297 

had  already  been  levied  by  the  government.  So  that  the 
above  described  amount  of  income  tax  is  not  the  total  of 
individual  incomes;  moreover,  the  amount  of  the  income  tax 
of  each  new  taxpayer  was  given  in  full  from  the  year  when  he 
became  qualified  for  paying  the  tax.  This  point,  too,  dif- 
fered a  little  from  the  former  regulations.  These  points  must 
all  be  taken  into  consideration  if  the  method  suggested  above 
for  calculating  incomes  is  to  produce  correct  results. 

We  may  sum  it  all  up  by  saying  that  after  the  Sino- Jap- 
anese War  the  incomes  of  the  middle  and  higher  classes  in 
Japan  gradually  increased  with  the  improvement  in  the 
economic  condition  of  the  country,  so  that  the  incomes  of 
these  classes  maintained  much  the  same  relation  as  before  to 
the  prices  of  commodities,  notwithstanding  the  rapid  rise  of 
the  latter  during  the  years  specified. 

Cost  of  Living 

During  the  Sino- Japanese  War  the  style  of  living  of  the 
Japanese  people  did  not  show  any  appreciable  effects  of  the 
war,  but  after  the  war  a  great  change  was  observable. 

When  the  war  was  concluded,  the  Japanese  people  in  gen- 
eral, stimulated  by  their  recent  victory,  began  to  show  a 
tendency  toward  a  more  luxurious  style  of  living.  1  his 
tendency  was  further  encouraged  by  the  increase  in  the  in- 
comes of  the  people,  especially  of  the  middle  and  lower  classes, 
due  to  the  increased  activity  in  the  economic  world  winch 
followed  the  war,  and  also  to  the  distribution  of  monetary 
gifts  by  the  government  among  soldiers,  sailer-,  etc.,  for  then- 
services  in  connection  with  the  war.  Then,  again,  the  war 
awakened  the  Japanese  people,  and  they  began  t<>  adopt 
many  features  of  Western  style  to  meet  the  various  so<  :ial 
requirements  of  their  improved  mode  of  living.  Thus,  on 
the  one  hand,  the  style  of  living  in  Japan  was  greatly  im- 
proved, but  on  the  other,  tin-  cost  of  living  was  considerably 
increased.  As  stated  in  the  foregoing  section-,  the  prio 
labor  and  the  incomes  <>t"  the  people  at  large  increased  in  pro- 
portion to  the  rise  in  the  prices  of  commodities  during  these 


298        ECONOMIC    EFFECTS   OF   THE   SINO-JAPANESE   WAR 

years.  It  we  look  only  at  these  facts,  the  living  conditions 
seem  to  have  been  very  encouraging,  but  when  we  consider 
that  the  cost  of  living  includes  not  only  the  daily  necessaries 
whose  prices  have  just  been  quoted,  but  also  house  rent,  bath 
charges,  etc.,  we  shall  understand  more  perfectly  what  effect 
the  war  really  had  upon  living  conditions  in  Japan.  Thus, 
in  the  present  section,  we  propose  to  examine  the  relation 
between  the  increase  in  the  incomes  of  the  people  and  the 
ratio  of  house  rent,  bath  charges,  etc., — items  of  expense 
which  constitute  a  part  of  the  cost  of  living. 

Before  the  Sino-Japanese  War,  with  a  view  to  ascertaining 
the  recent  changes  in  the  cost  of  living  of  the  people,  the 
Monetary  Investigation  Commission  appointed  by  the 
Finance  Department  of  the  Japanese  Government  investi- 
gated the  prices  of  such  commodities  as  rice,  bean  paste  {miso)t 
salt,  soy,  firewood,  charcoal,  cotton  fabrics,  house  rent  and 
bath  charges  in  the  city  of  Tokyo,  made  averages  of  these, 
and  compared  these  averages  with  the  prices  of  labor  and 
commodities  in  the  same  city,  as  follows: 

Ratio  of  Cost  of  Living  to  Prices  of  Commodities  and  Labor,  1 873-1 893 


Items 

1873 

1877 

1882 

1887 

1892 

1893 

Cost  of  living: 

Rice 

Bean  paste 

Salt 

Soy 

Firewood 

100 
100 
100 
100 
100 
100 
100 
100 
100 

hi 
138 
76 
130 
125 
100 
106 
123 
165 

184 
221 
158 
157 
305 
226 
129 

150 
246 

103 

153 
86 

138 
153 
127 
112 
192 
216 

151 
197 
108 
154 
158 
179 
118 
226 
221 

154 
192 

95 
156 
162 

Charcoal 

Cotton  fabrics 

House  rent 

Bath  charges 

165 
124 
225 
221 

Average 

Prices  of  commodities 

100 
100 
100 

119 
107 
106 

197 

95 
90 

142 
104 
131 

168 
122 
128 

166 
122 

Prices  of  labor 

129 

From  the  figures  in  the  foregoing  table  it  will  be  seen  that 
prices  of  labor  rose  steadily  with  the  increased  prices  of  com- 
modities, but  they  remained  far  below  the  increased  cost  of 
living.     We  shall  now  continue  the  investigation  from  the 


SOCIAL    KFFECTS 


299 


year  1893  on.  As  we  have  no  authentic  figures  for  house 
rent  and  bath  charges  during  these  years,  we  shall  first  com- 
pare the  prices  of  daily  necessaries  with  the  prices  of  labor,  and 
then  compare  them  with  the  rate  of  increase  in  taxes,  which 
was  especially  remarkable  after  the  war.  The  average  pri<  es 
of  some  of  the  daily  necessaries  in  the  city  of  Tokyo  are  shown 
in  Table  IX  at  the  end  of  this  chapter.1 

According  to  the  figures  in  this  table,  the  prices  of  labor 
always  advanced  faster  than  the  index  number  for  the  prices 
of  commodities.  They  also  rose  steadily  year  after  year, 
except  in  1903,  when  they  fell  slightly.  Bath  charges,  too, 
rose  gradually  during  these  years,  while  house  rent  rose  con- 
siderably in  response  to  improvement  in  the  means  of  trans- 
portation in  the  city  of  Tokyo.  Such  being  the  case,  it  may 
be  stated  that  the  style  of  living  of  the  people  did  not  improve 
commensurately  with  the  rise  in  the  price  of  labor  and  the 
incomes  of  the  people. 

In  addition  we  must  note  the  changes  in  taxes,  which  in- 
creased the  financial  burdens  of  the  people,  and  indirectly 
made  improvement  in  style  of  living  difficult.  The  increase 
in  the  burden  of  each  taxpayer  (such  as  government,  pre- 
fectural,  municipal,  town  and  village  taxes)  was  50  per  cent 
in  1898,  and  100  per  cent  in  1900,  and  this  increase  certainly 
reduced  the  scale  of  living  to  a  considerable  extent.  The 
particulars  are  given  in  the  table  below: 

Comparison  of  Wages,  Cost  of  Living  and  Taxes,  1 893-1903 


Year 


Prices  'it  labor 


Prices  of  daily 
in  '  essaries 


I   ration 


1893 
1894 

1895 
1896 

1897 
1898 
1899 
1900 
1901 
1902 
1903 


100  n 
109.8 

1 24   2 

132-5 
145  0 

152.8 
155-2 
[68  8 

1705 
171 .0 

171.  6 


100. o 
109  2 

IIS    ,, 

[29  1 

[40    2 

145  'S 
U7  B 
1  (.7  2 
169  7 
170.6 
170.2 


1 00.0 

[01     2 

IO5    2 

1  1  I    'i 

133-8 
1  p  t> 
[87  2 
[99    5 

21 1  7 
226.2 
218  6 


1  Post,  p.  316. 


300        ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 

In  short,  after  the  Sino-Japanese  War,  while  the  price  of 
labor  rose,  and  the  general  income  of  the  Japanese  people 
increased  to  a  considerable  extent,  the  burden  of  taxes  in- 
creased also,  prices  of  commodities  rose,  and  thus  the  general 
cost  of  living  advanced.  In  addition,  the  people  developed 
a  tendency  toward  more  luxurious  living;  therefore  the  style 
of  living  in  Japan  did  not  improve  at  all  during  these  years. 
And  it  may  also  be  stated  that  these  obstacles  to  improve- 
ment in  the  condition  of  living  during  these  years  all  arose 
from  the  Sino-Japanese  War.  See  Table  X  at  the  end  of  this 
chapter.1 

Population 

The  economic  activity  that  followed  the  Sino-Japanese 
War  brought  about  much  prosperity  in  cities  throughout  the 
country,  and  as  many  kinds  of  industrial  enterprises  were 
started  in  these  cities,  there  was  naturally,  in  consequence,  a 
general  demand  for  labor  in  such  places,  especially  in  what 
are  known  as  the  industrial  centers  of  the  country.  In  such 
localities  the  price  of  labor  and  the  income  of  the  people  in 
general  were  rather  higher  than  in  the  agricultural  districts. 
Large  numbers  of  people,  therefore,  moved  from  the  agri- 
cultural districts  to  these  industrial  centers.  They  included 
many  ambitious  young  persons  who,  stimulated  by  the  gen- 
eral awakening  after  the  war,  left  these  districts  to  seek  their 
fortunes  in  cities.  Thus  the  tendency  was  towards  a  con- 
centration of  population  in  cities  during  these  years,  as  indi- 
cated in  the  statistics  given  in  Tables  XI  (i)  and  XI  (2)  at 
the  end  of  this  chapter.2 

As  the  figures  in  these  tables  indicate,  the  rate  of  increase 
in  the  total  population  of  the  towns  and  villages  was  rather 
small— smaller,  except  in  1898,  than  that  in  the  whole  popu- 
lation of  the  country,  and  far  smaller  than  the  rate  of  increase 
in  the  population  of  cities.  Among  towns  and  villages,  the 
population  in  those  towns  whose  population  is  above  10,000 
showed  a  considerable  increase. 

Let  us  now  consider  the  number  of  towns  and  villages 

lPost,  p.  317.  2  Post,  pp.  318,  319. 


SOCIAL    EFFECTS 


30I 


whose  population  is  less  than  20,000  each  (Class  No.  1) ;  then 
those  cities  whose  population  is  above  20,000  but  below 
100,000  (Class  No.  2)  and  finally  those  cities  whose  popula- 
tion is  more  than  100,000  each  (Class  No.  3)  with  the  popu- 
lation of  these  cities,  towns  and  villages,  and  then  compare 
them  with  each  other.  The  rate  of  increase  in  the  population 
of  the  towns  and  villages  of  Class  No.  1  is  smaller  than  in  the 
case  of  Classes  Nos.  2  and  3,  and  far  smaller  than  the  rate  of 
increase  in  the  whole  population  of  the  country.  The  rate  of 
increase  in  the  population  of  cities  in  Class  No.  2  was  a  little 
larger,  and  it  was  largest  of  all  in  the  case  of  cities  in  Class 
No.  3,  as  the  statistics  below  indicate: 

Towns  and  Villages  Whose  Population  is  Less  Than  20,000  (Class  No.  i) 


Year 

Number  of 

towns  and 

villages 

Total 
population 

Percentage  of 
number  of 
towns  and 

villages 

Percentage  of 
population 

1888 

7L295 
15,810 

13,947 
13,224 
I2,35i 

35,874,298 

37,275,893 
39,384,980 
40,974,(121 
42,430,105 

100. 0 
106.0 
109.0 
1 11  .0 
118. 0 

100. 0 

1893 

1898 

104.4 
1 10.6 

1906 

1908 

118. 0 
126.0 

Cities  Whose   Poplxation   is   20,000  and  Moke    but   Less   Than    100,000 

(Class  No.  2) 


Year 


1888 

1893 
1898 

1903 
1908 


Number  of 
cities 


SO 
61 

7-1 
80 

95 


Population 


I  ,'808,726 

2,270,1 10 
2,520,151 
3.098,251 
-775.540 


Percentage  of 
population 


100 
120 
139 

171 

208 


Cities  Whose  Population  is  100,000  and  More  (Class  No.  3) 


Year 


Number  of 
cities 


Population 


Percentage  of 
population 


1888 

1893 
1898 

1903 
1908 


6 
6 

8 

9 
10 


2,422,455 
2,514.973 
3.497,910 
4.4<x>,564 
5.536,835 


100 
104 
144 
185 
229 


302        ECONOMIC    EFFECTS   OF   THE    SI  NO- JAPANESE   WAR 

The  percentage  of  the  whole  population  of  the  country 
means  the  rate  of  increase  in  the  whole  population  of  Japan. 
Observing  the  above  figures  in  this  light,  it  may  be  stated 
that  the  rate  of  increase  in  the  population  of  towns  and  vil- 
lages, especially  in  those  of  small  population,  was  less  than 
the  rate  of  increase  in  the  whole  population  of  the  country. 
This  indicates  that  the  people  of  these  smaller  towns  and 
villages  were  moving  to  the  cities. 

The  migration  of  people  to  cities  is  a  phenomenon  which  is 
unavoidable  with  the  advance  of  society.  And  the  Sino- 
Japanese  War,  which  brought  about  a  general  awakening  of 
the  Japanese  people,  may  be  considered  one  of  the  principal 
factors  which  caused  the  concentration  of  people  in  cities  in 
Japan. 


SOCIAL   EFFECTS 


303 


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304        ECONOMIC   EFFECTS   OF   THE   SINO-JAPANESE   WAR 


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SOCIAL    EFFECTS 


305 


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306        ECONOMIC   EFFECTS   OF   THE    SINO-JAPANESE   WAR 


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SOCIAL    EFFECTS 


307 


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308        ECONOMIC   EFFECTS   OF   THE   SINO-JAPANESE   WAR 


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309 


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310       ECONOMIC    EFFECTS   OF   THE   SINO-JAPANESE   WAR 


O-00    O  "IvO    N    h    IOm    NN    N« 
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SOCIAL    EFFECTS 


311 


Index  numbers  for 
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notes  and   oilier 

paper  money  in 
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313 


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CHAPTER   IX 
CONCLUSION 

The  Sino-Japanese  War  was  begun  on  July  25,  1894,  and 
on  April  17  of  the  next  year  a  treaty  of  peace  was  concluded. 
We  have  discussed  in  the  foregoing  chapters  the  effects  of  the 
war,  especially  as  to  expenditure  and  economic  phases  in 
general.  It  is  not  necessary  to  add  more.  Yet,  on  reflection, 
we  note  two  or  three  points  which  may  be  especially  dwelt 
upon  in  generalizing  upon  the  phenomena  which  have  here 
been  presented — in  particular  the  age-long  weakness  of 
China  as  exposed  by  this  war  and  the  awakening  of  Japan 
which  followed  the  conflict. 

Prior  to  the  Sino-Japanese  War,  the  various  nations  of  the 
world  had  regarded  China  as  a  powerful  nation  and  one  not 
to  be  held  in  contempt.  There  was  a  general  belief  in  her 
fighting  strength,  and  because  she  had  the  Manchurian  cav- 
alry on  land  and  the  Peiyang  fleet  at  sea  at  the  beginning  of 
the  war,  they  thought  Japan  would  certainly'  be  defeated. 
But  after  the  commencement  of  hostilities,  China  suffered  one 
defeat  after  another,  and  the  dignity  of  that  great  Empire  of 
forty  centuries  was  completely  lost.  The  "sleeping  lion" 
at  last  became  the  "lion  that  does  not  awaken."  What  a 
tragic  state  of  affairs!  Thereafter,  the  "lion  that  does  not 
awaken,"  with  her  mild  climate,  rich  natural  resources,  and 
dense  population,  became  the  center  of  attraction  for  the 
world.  There  followed,  in  quick  succession,  the  acquisition 
of  important  concessions — Kiaochow  Bay  by  Germany 
(March  6,  1898),  Port  Arthur  and  Dairen  by  Russia  (March 
27,  1898),  Weihaiwei  and  Kow-loon  extension  by  England 
(June  1  and  6,  1898,  respectively),  and  Kwangchow  by  France 
(November  16,  1899).  The  acquisition  of  a  concession  by 
one  nation  became  the  excuse  for  another  nation  to  demand 
one  also,  and  the  latter  an  excuse  for  more  demands  on  the 
part  of  the  first.     The  European  Powers  were  not  satisfied 

3-0 


CONCLUSION  321 

with  the  men-  establishment  of  a  concession,  but  concluded 
treaties  for  the  nonalienation  of  territory,  thereby  establish- 
ing so-called  "spheres  of  influence."  At  last  came  the  dec- 
laration by  America,  in  1899,  of  the  principle  of  the  "open 
door"  and  "equality  of  opportunity"  in  China.  The  prin- 
ciple of  the  balance  of  power  in  Europe  brought  about  a  new- 
situation  in  the  Orient.  This  was  a  by-product  of  the  Sino- 
Japanese  War.  Japan  had  to  face  this  new  situation,  besides 
undertaking  various  post-bellum  enterprises.  The  conse- 
quences of  the  Sino-Japanese  War  were  indeed  serious. 

Now  Japan  began  to  realize  her  national  strength,  and  in 
view  of  the  changed  conditions  in  the  Orient  after  the  war, 
planned  the  development  of  the  national  forces  by  starting 
various  ambitious  undertakings  quietly  and  with  united 
efforts.  As  a  result,  (1)  expenditures  increased,  and  (2) 
consequently  the  taxes  of  the  people  increased,  (3)  the  cur- 
rency was  inflated,  owing  to  the  various  government  post- 
bellum  undertakings  and  the  initiation  of  private  enterprises, 
and  (4)  the  prices  of  commodities  rose  suddenly.  These 
were  the  noteworthy  features.  We  shall  show  below  the 
changed  percentages  as  calculated  on  the  basis  of  the  year 
1887 — the  next  year  after  the  resumption  of  converting  notes 
into  specie. 

By  the  following  table,  we  may  ascertain  the  various 
changes  which  took  place  from  1887  to  1903.  With  [894 
1895  as  the  limit,  we  notice  especially  that  there  have  been 
.  xtraordinary  changes  in  all  the  various  items  except  popu- 
lation. Before  the  war,  the  fluctuation  was  generally  very 
slight,  but  since  the  war  there  have  been  extraordinary 
fluctuations.    This  was  the  result  of  the  people's  changed 

conceptions  of  Japan's  position  in  the  Orient,  which  material- 
ized in  the  ambitious  post-bellum  enterprises  heretofore 
described.  We  consider  these  changes  as  a  sign  of  extraordi- 
nary development. 

Thus  after  the  war  the  phenomena  of  social  lite  completely 
changed  from  ante-war  times.  Society  assumed  an  entirely 
new  aspect,  as  if  completely  revolutionized.     In  other  word-. 


322       ECONOMIC    EFFECTS   OF   THE    SINO-JAPANESE   WAR 
Fiscal  Statistics  in  Annual  Percentages,  1887-1905  a 


Year 

Expenditure 

Tax  revenue 

Currency  in 
circulation11 

Average  price 
of  commod- 
ities 

Increase  in 
population6 

1887.. 

100. 0 

100. 0 

100.8 

102. 1 

100. 0 

1888.  . 

102.6 

97-7 

105.2 

107.9 

101 .4 

1889.  . 

100.3 

107.6 

in  .0 

in  .7 

102.5 

1890.  . 

103.4 

99.2 

103.4 

114. 4 

1035 

1891.  . 

105.2 

97.2 

106.2 

no. 4 

104  -3 

1892. . 

96.6 

101 .4 

109.2 

114. 6 

105.2 

1893.. 

106.5 

105.7 

120. 1 

118. 1 

105-9 

1894°  . . 

98.3 

107.6 

124.8 

127.2 

107.0 

i895d  • 

107.4 

112. 7 

142.0 

134-4 

108.3 

1896.  . 

212.5 

II5-9 

I5I-3 

145 -1 

109.3 

1897 •• 

281.5 

143.7 

166.4 

163. 1 

no. 6 

1898.  . 

276.6 

155- 1 

143-8 

171 .1 

112. 1 

1899.  . 

319-9 

201 .6 

169.6 

170.9 

112. 8 

1900.  . 

368.5 

213. 1 

160.2 

182.8 

1 14.4 

1901 .  . 

335-9 

227.1 

154-5 

174-5 

116. 3 

1902 . . 

364.0 

246.7 

I64-5 

170.6 

117. 9 

1903 .  . 

3I4-I 

243- 1 

166.8 

182.8 

119. 7 

1904°  . 

758.2 

530.7 

256.1 

233-0 

125.0 

1905' . 

736.8 

581.8 

3°6 -3 

232.1 

I3I-7 

•  The  percentage  of  the  expenditure  means  the  total  amount  of  expenditure  (net  amount) ;  the 
percentage  of  revenue  from  taxes  means  the  revenue  from  taxes  and  the  revenue  from  the  profits 
of  the  monopoly  bureaus.  The  percentage  of  currency  was  based  upon  the  standard  at  the  end  of 
1886,  the  percentage  of  prices  of  commodities  on  the  average  wholesale  prices  of  forty  of  the  prin- 
cipal kinds  of  merchandise  sold  in  Tokyo  in  January,  1877,  and  the  percentage  of  population  means 
the  population  as  registered  at  the  appointed  places  of  registry. 

b  At  close  of  year.  °  Beginning  of  Sino-Japanese  War. 

d  Ending  of  Sino-Japanese  War.  e  Beginning  of  Russo-Japanese  War. 

1  Ending  of  Russo-Japanese  War. 

the  Sino-Japanese  War  marked  a  new  period,  in  which  the 
aggressive  spirit  of  the  nation  so  notably  shown  in  the  period 
of  the  Restoration  of  Meiji  had  taken  on  new  life  after  twenty- 
five  years  of  quiet,  and  was  now  to  replenish  the  national 
forces  at  home  and  develop  her  credit  abroad.  Furthermore, 
the  remarkable  development  of  the  nation  within  so  short 
a  period  was  largely  due  to  the  spirit  of  enterprise  shown 
soon  after  the  close  of  the  war.  So  the  effects  of  the  war 
as  presented  in  the  foregoing  chapters  really  embody  the 
history  of  Japan's  economic  development  after  the  Sino- 
Japanese  War. 

What  we  regret  is  the  fact  that  the  policy  of  the  Japanese 
Government  was  not  more  carefully  considered,  since  it  was 
on  account  of  the  extreme  haste  to  meet  the  new  situation 
that  the  currency  was  inflated,  the  burdens  of  taxation  were 


CONCLUSION  323 

extraordinarily  increased,  and  the  prices  of  goods  went  up; 
consequently,  while  the  income  of  the  people  generally  in- 
creased in  due  proportion,  the  government  undertakings  did 

not  fully  meet  the  need  of  improving  the  living  condition-  ol 
the  people.  Fortunately,  however,  the  people  generally 
showed  a  sincere  devotion  to  the  country  and  were  not  seri- 
ously indignant  because  their  living  conditions  did  not  im- 
prove pari  passu  with  the  financial  and  economic  develop- 
ment of  the  nation.  Xo  serious  social  or  political  problems 
arose  at  this  time.  This  fact  should  be  set  forth  in  bold- 
faced type  in  discussing  the  economic  effects  of  the  war. 

In  short,  the  economic  development  after  the  Sino-Japa- 
nese  War  was  in  general  so  extraordinary  that  the  phenomena 
which  attracted  attention  before  the  war  were  no  longer 
noticeable.  But  under  all  this  apparent  prosperity  there  was 
running  a  dangerous  undercurrent,  viz.,  the  aforementioned 
rise  in  the  prices  of  commodities,  the  inflation  of  the  currency, 
and  the  extraordinary  increase  in  the  government's  revenues 
and  expenditures  as  well  as  in  taxes.  Thus  we  must  not  for- 
get that  the  effects  of  the  war  upon  the  economic  world  had  a 
dark  as  well  as  a  bright  side.  The  bright  side  shone  as  the 
people  endeavored  to  utilize  wisely  the  effects  of  the  war  in 
meeting  the  new  situation.  The  dark  side  was  inevitable 
from  the  passing  condition  of  our  economic  world,  the  evils 
resulting  from  the  period  of  inconvertible  notes,  which  had 
just  been  tided  over,  having  reasserted  themselves  as  a  by- 
product of  the  post-bellum  upheaval  of  economics.  That  the 
war  was  the  cause  of  all  this  cannot  be  denied.  But  the 
nature  of  our  economic  world  and  the  economic  policies 
pursued  in  Japan  were,  needless  to  reiterate,  still  more  re- 
sponsible for  such  a  state  of  things.  The  Sino-Japanese 
War  was,  indeed,  a  test  of  our  national  strength  and  resulted 
in  the  self-realization  and  awakening  of  the  nation,  thereby 
bringing  in  its  train  a  notable  economic  development.  But 
there  have  been  many  examples  in  history  of  the  downfall  ol 
mighty  empires  even  while  enjoying  great  prosperity,  such 
as  Alexander  the  Great,  the  Roman   Empire,  etc.     Indeed, 


324       ECONOMIC   EFFECTS   OF   THE   SINO-JAPANESE   WAR 

war  is  not  a  true  cause  of  national  greatness,  nor  victory  in 
war  a  sure  means  of  bringing  about  such  greatness.  On  the 
contrary,  there  must  be  an  irresistible  rise  in  nationalism  to 
wage  a  victorious  war,  which  will  prove  only  the  first  step  in 
the  advancement  toward  an  ideal  goal.  The  Sino- Japanese 
War  was  no  more,  no  less  than  that,  and  it  is  far  from  our 
desire  to  extol  the  material  and  moral  effects  of  war. 


INDEX 


Administration:  increase  of  expendi- 
tures for,  43,  102-3;  general  expendi- 
tures for  (1893-1903),  144. 

Agriculture:  prohibition  of  resale  of 
Japanese  products  of,  in  Kankyodo, 
16;  progress  in,  89;  Bank  of  Agri- 
culture and  Industry,  90,  04,  107, 
175,  178  et  seq.,  193;  expenditures  to 
encourage,  139; experimental  stations, 
273;  capital  invested  in  (1896-1903), 
277. 

Amoy,  188. 

Anshantan,  captured  by  Japanese,  31. 

Antung,  Chinese  evacuation  of,  26. 

Aomori,  i<  <>. 

Army:  organization  of,  corps,  25-6; 
size  of,  35;  rehabilitation  of,  89-90, 
<»4  et  seq.;  four  year  expansion  schei 
(1895-1899),  97  et  seq.;  expenditures 
for  (1893-1903),  99-100;  extraordi- 
nary expansion  expenditures  for 
-1903),  101;  use  of  Chinese  in- 
demnity for  expenditures  for,  120. 

Asan,  19,  21-2. 

Bakeuchu,  13. 

Bank  notes:  51;  issued  by  Bank  of 
Japan  (1894-1896),  55,  166,  286; 
issued  to  meet  extra  expenditures,  56; 
increased  circulation  of,  154;  redemp- 
tion of  national,  162,  [67,  191  2; 
antee  reserve  lssui  s  of,  [66,  [68 
et  seq.,  200;  issued  by  Hank  of  For- 
mosa,    [86-7;  issuance  of  nal 

ne,|  1  [893    1  -mm1,  with  in- 
e  it  decr<  ase,  197-8. 

Bank  of  Japan:  72,  82,  152,  155.  161, 
[93;  loans  in  government  by,  51,  59 

[.,  73,  75.  83,  [58,  [99;  v, 
penses  met  by  note  issue  of  0<Sn4: 
1896),  55,  166,  286;  redemption  of 
loans  of,  76;  enlarged  business  of,  90, 
156,  1 75;  deposit  of  1  hinese  indem- 
nity funds  in,  [22;  purchase  <>t  bonds 
by,  125;  increased  capitalization  of , 
176. 

Banks:  Hypothec  and   Industrial,  83, 

00,  94,   175,   17N  et  seq.,  J74;  national 

banks,  1  hanged  to  ordinal 
on,  [93;  oi  Agriculture  and  Industry, 
90,94,  i<>7,  [20, 274;  subsidies  to,  90, 
103,  n>7,  [20,  170,  [82;  bonds  issued 
by,  156;  regulations  concerning  issue 


of  bank  notes  by,  161 ;  reorganization 
of,  175  et  seq.,  iv-3_4;  development  of 
realty,  178  et  seq.;  deposits  and  loans 
of  (1893-1903J,  195;  capital,  de- 
posits, profits  and  dividends  of 
(1893-1903),  207.  See  also  under  in- 
dividual headings. 
Banks  of  Agriculture  and  Industry: 
subsidies  to,  90,  107,  [20,  [79;  estab- 
lishment of,  04,  175:  business  of,  [78 
el  seq.  (1897  [903),  204-5,  274;  re- 
organization of,  193-4;  loans  by 
202,  274. 

Bellenue,  Freni  h  missionary,  o. 

lien,  Li  Sai,  Korean  Progre-M\e  leader, 

12. 
Bokueiko,   Korean   Progressivi 

14- 

Bokukeiju,  revolt  of,  10. 

Boxer  Rebellion,  132. 

Budget:  of  revenue  and  expenditi 
47  8,   I  [893   1 9]  J;  for  army 

and  navy,  57,  -  icpenditures 

after  1896,  90;  for  1899,  131. 

Business  tax,  90,  129. 

Chaimucheng,  battle  at,  27 
Chang,  Li  Hung,  12-3, 15;  peace  repre- 
sentative of  China,  33. 
Chemulpo:  15,  21,  23;  opened  to  trade, 

12-,^;  Tre.ii  y  of ,  [3-4. 

(   hilili,  IYo\  ince  of,  3]    2,  57. 

(holla,  Province  of,  revolutionary 

movements  in,  1 7. 
Chung-(  hong,  Province  of,  revolution- 
movements  in,  17. 
Chungking,  opened  to  conm 

(  ities,  town-  and  villages:  increase  in 
annual  expenditures  for  (1893 
1  $8;  ratio  "I"  increase  <>f  expenditures 
for  [904  ><\ er  t8<  icpansion  of 

expenditures  for,  [42;  population  of, 
1 . '  1  B93   [903  ,318  9; increase  in 

population  [905)1  in  annual 

percentages,  322. 
( !( >.tl,  rise  in  pi  i 

inial   Bank  of  I  lokkaido:  busi 

of,  175  6,   17s  /at  ion 

of,  I9374. 
Communications   Office,    expenditures 

for  (1894-190;  \6. 

Conservative  party,  in  Korea,  12  - 


325 


326 


INDEX 


Currency:  expended  for  war  expenses 
(1894-1896),  57;  scarcity  of,  81,  83; 
inflation  of,  84-  5,  154,  [96;  reform  of, 
system,  118,  161,  i<>5,  232,  235;  in- 
ed  volume  of,  288;  in  circulation, 
in  annual  percentages  (1887-1905), 
322. 

Customs,  revenue  from  (1889-1908), 
291. 

Disbursements,  monthly  (1894-1896), 
59;  for  government  and  private  rail- 
ways (1 893-1903),  266,  268. 

Education:  improvements  in  system  of, 
84,  89,  94,  112;  use  of  indemnity 
funds  to  promote,  132;  expenditures 
for,  138-9,  (1893-1903),  151. 

Enterprises:  comparison  of  expendi- 
tures for  post-bellum,  with  total  an- 
nual expenditures  (1894-1903),  91  et 
seq.;  revenue  for  post-bellum,  (1896- 
1903).  92!  revenue  for  (1895-1905), 
150;  expenditures  for  (1895-1905), 
141,  150;  development  of,  226. 

Exchange,  rates  of,  in  London,  Paris 
and  Berlin  (1886-1895),  163. 

Factories,  number  of,  and  capital  in- 
vested in  (1893-1903),  212-3. 

Factory  hands:  number  of  (1893-1903), 
211  et  seq.,  (1896-1903),  218;  per- 
centage of,  to  total  population  (1896- 
1903),  220;  percentage  of  adult  and 
minor,  to  total  number  of  (1896- 
1903),  221;  comparison  of  number  of 
adult  male  to  female  (1896-1903), 
222. 

Fenghuangcheng,  25;  Chinese  evacua- 
tion of,  27. 

Foreign  Office:  expenditures  for  (1894- 
1903),  36.  (1894-1895),  43T4. 

Formosa:  6;  Japanese  expedition  to,  II ; 
ceded  to  Japan,  33,  224,  229;  fighting 
in,  35;  Bank  of,  94,  175,  185  et  seq., 
1 M4,  206;  expenses  incurred  in,  103, 
109  et  seq.;  railways  of,  III,  261; 
loans  for  development  of,  115-6;  ex- 
penditures for  (1895-1903),  146  et 
seq.:  production  of  sugar  in,  229; 
trade  of,  with  Japan  (1897-1903), 
230;  passengers,  freight,  income,  etc. 
of  railways  of  (1897-1903),  269. 

Fortresses,  expenditures  for  construc- 
tion of,  98-9. 

Foundary,  iron:  establishment  of,  89, 
04,  96,  27;,;  expenditures  for  con- 
struction oi,  103-4:  use  of  indemnity 
funds  for  construction  of,  120. 


France:  occupation  of  Kwangchow  by, 

7,  34,  320;  interference  of,  in  Liaotung 
Peninsula,  33-4;  tariff  agreement 
with,  233,  290. 

Fukushima,  106. 

Fusan:  9-10,  22-3;  opened  to  trade,  13. 

Germany:  acquisition  of  Kiaochow  Bay 
by,  7,  34, 320;  invitation  to,  to  occupy 
Korean  territory7,  12;  interference  of, 
in  Liaotung  Peninsula,  33-4;  mone- 
tary system  of,  162;  tariff  agreement 
with,  290. 

Goko,  revolt  of,  10. 

Gold  standard:  adoption  of,  83,  123, 
159,  163  et  seq.,  225,  232-3,  286-7. 

Great  Britain:  occupation  of  Weihaiwei 
by.  7,  34,  320;  invitation  to,  to  oc- 
cupy Korean  territory,  12;  inter- 
ference of,  in  Liaotung  Peninsula, 
33-4;  tariff  agreement  with,  233. 

Griffis,  Dr.  William  Elliot,  cited,  8. 

Hachioji,  105. 

Haicheng,  25,  27,  29,  31. 

Hanabusa,  Yoshikata,  Charge  d'Af- 
faires  at  Seoul,  II,  13. 

Hangchow,  opened  to  commerce,  33, 
232. 

Heung-Sun,  Prince,  9-10;  Korean  Con- 
servative leader,  12-3. 

Hiroshima:  43;  Imperial  army  head- 
quarters at,  22,  50;  telephone  exten- 
sion in,  264. 

Hokkaido:  colonial  development  of,  90, 
112;  plan  for  railway  construction  in, 
106,  258;  bond  issue  for  railway  con- 
struction in,  114;  Colonial  Bank  of, 
175-6,  178  et  seq.,  194. 

Home  Office:  expenditures  for  (1894- 
1903),  36,  (1 894-1 898),  43-4. 

Hongkong,  branch  bank  at,  188. 

Hooshan,  Chinese  defeat  at,  26-7. 

Hori,  Lieutenant,  military  instructor  in 
Korea,  12. 

Huanglinchi,  30. 

Huayuankow,  27-8. 

Hypothec  Bank:  establishment  of,  83, 
90,  94,  175;  business  of,  178  et  seq., 
(1897-1903),  203;  reorganization  of, 
193-4;  advances  made  by  (1898- 
1903),  274, (1897-1903),  276. 

Income  tax:  131;  returns  from  (1893- 

1903),  295  et  seq. 
Indemnity:  Chinese,  to  Japan,  12,  20, 

33,  82,  119,  224,  286;  transfer  of,  57- 

8,  77-8,  1 16;  use  of,  for  army  expendi- 
tures, 90,  120;  revenue  from,  96-7, 
119-20. 


INDEX 


327 


Industry:  capital  investment  in  11896- 
1903),  209-10,  219,  240,  243;  progress 
of,  2  11. 

Industrial  Bank:  i<>4;  business  of,  188- 
9,  206. 

Inouye,  Kaoru,  vice-minister  of  Japa- 
nese mission  to  Fusan,  10. 

Inouye,  Ryoka,  Lieutenant  Command- 
er, 10. 

Interest  rates:  in  Osaka  and  Tokyo,  65; 
on  loans  by  laws  Numbers  8  and  25, 
77;  paid  on  bonds  (1893-1903),  117. 

Isotake-no-.Mikoto,  8. 

Itom,  Prince,  15. 

"Japanism",  157-8. 

Jingo,     Empress,     expedition     of,     to 

Korea,  8. 
Judicial  Office,  expenditures  for  (1894- 

1903),  36.  (1895),  43.  45- 

Kai,  Yuan  Shi,  Chinese  Minister,  13-4, 
16-7. 

Kaidaichi,  106. 

Kaiping,  27,  29. 

Kanghwa  Island  Affair,  10. 

Kankyodo,  16. 

Kiaochow,  German  occupation  of,  7, 
.34.  3?o. 

Kin,  Kin  Gyoku,  Korean  Progressive 
leader,  14;  assassination  of,  16. 

Kinchow-ching,  capture  of,  28-9. 

Kiuliencheng,  25;  Chinese  evacuation 
of,  26-7. 

Kiun,  Kim  Ok,  Korean  Progressive 
leader,  12. 

Kizuki  (Izumo  Province),  8. 

Kobe:  extension  of  telephone  service  in, 
106;  encouragement  to  navigation 
from,  108. 

Komatsu,  Prince,  General,  Chief  of 
Japanese  General  StalT,  32. 

Konwasai,  bat  tie  at,  27. 

Korai,  overthrow  of  kingdom  of,  4. 

Korea:  population  and  area  of,  3: 
Chinese  and  Japanese  attitude  to- 
ward, 4  c/  \,(/.;  11  2;  Japanese  expe- 
dition to,  S;  trade  with,  o,  12,  154, 
237;  independence  of,  10,  14,  21 ;  dis- 
turbance in,  13  et  seq.,  35. 

Kure,  106. 

Kuroda,  Kiyotaka,  chief  of  Japa- 
Mission  to  Fusan,  10. 

Kwangchow  Bay,  leased  to  French,  7, 
34.  320. 

Kyoto:  124;  extension  of  telephone 
system  in,  106,  264. 

Labor:  prices  of,  in  Tokyo  and  Osaka 

(1893-1903 1,  282,  292,  294;  pi 


in  Tokyo  (1873   1910),   293,    JI2    1; 

fluctuation   of  price  of     i 
21)4:  pricesof,  and  commodities  com- 
pared with  cost  <jf  living,  298;  price 
of,  in  Osaka  (1893-1903),  314-5. 

Land  tax,  1  jo-  1 . 

1  ion- and  Consul  ites:  expenditures 
of  ex- 
penditure- foi 

Liaotung    Peninsula:  ceded   to  Japan, 
33;  retrocession 
286;  compensation  for  return  of,  1 1 8. 

Liaoyang,  25,  27. 

Loans:  public,  50,  54,  57-8;  of  Bank  of 
Japan,  51,  et  seq.,  75,   83,   158,   [99; 
details  of  "  1- ir>t  ",  61  et  seq.;  n 
tions  for  war,  64 

66 et  seq.;  "Third",  68  et  seq.:  details 
of  first  three,  69  et  seq.;  receipts  from 
war,  72:  extraordinary  spe  ial,  72  \\ 
"Fourth",  74;  based  on  laws  Num- 
bers 8  and  25,  75  et  seq.;  for  railway 
and  telephone  improvem  at,  90,  114; 
for  expenditures  for  Sino-Japanese 
War  I  [894-1910  .  1  [3;  for  industrial 
enterprises,  114..'  seq.;  for  Formo6an 
development  ,11-  6;  sterling,  n6;  by 
Hypothec  Bank  and  Banks  of  Agri- 
culture and  Industry,  181,  202;  out- 
standing, of  Hypothec  Bank 
1903  .  [83;  of  Colonial  Bank  of  Hok- 
kaido, 1 85;  of  banks   [893   1  103  ,195. 

Loochoo,  6;  as  a  Japani  --ion, 

10-1. 

Manchuria,  fighting  ii 

Merchandise,    value    of,    sold    (1898- 

1903),  242. 
Merchant    Marine:  subsidies  to, 

263,    [893   1903),  270  <( 

of,  2  - 
Min,  Prin  nation  of,  14. 

Miyake,  Dr.  Yuiiro,  cited,  157. 
Monopolies;  leaf  tol  .   [26;  in- 

jed  revenue  from  tobai  co,   1 32, 

137:  workings  of,  1 34  1 1 
Motienling, 

isaki:   1.;,   t<>:  subsidy  for  harbor 
improvement  ai  lephone  ex- 

tension in,  264. 

iya:   105;  telephone  extension  in, 
264. 
Naval  Office:  expenditure 

[903  ,36;  ext  raordinary  expenditures 
for  (1894   |l'"'  •  :" 
\.i\  igat  ion,  subsidies  for,  [03,   loi 
Navy:  rehabilitation  and  expansion  of, 
•.  04  et  seq.;  seven  yt 
sion  -chei 


328 


INDEX 


expenditures  for  (1893-1903),  99- 
1 «  m  1 ;  exl  raordinarj  expansion  expend- 
itures  for  (1896-1903),  102;  use  of 
Chinese  indemnity  for,  expansion 
funds,  120. 

Negotiable  paper,  handled  (1893-1895), 
225,  1 1893   i<K>3),239. 

Ncuchang,  285;  encouragement  to  nav- 
igation from,  108. 

Niuchwang,  capture  of,  30-1. 

Nodzu,  Michitsura,  Lieutenant-Gen- 
eral,  Commander-in-chief  of  Fifth 
Army  Division,  23. 

Notes,  government:  issued,  160-1;  re- 
demption of,  189  et  seq.;  cleared 
(1893-1903),  241. 

Okuninushi-no-Mikoto,  8. 

"Open  door"  policy,  321. 

Opium  War,  7. 

Osaka:  124;  interest  rates  in,  65,  75;  ex- 
tension of  telephone  service  in,  106; 
subsidy  for  harbor  construction  at, 
262 ;  prices  of  commodities  and  wages 
in  ( 1 893-1903),  282,  292,  294;  whole- 
sale prices  in  (1 893-1 903),  310; 
prices  of  labor  in  (1 893-1 903),  314-5. 

Oshima,  Major-General,  Japanese  of- 
ficer, 17. 

Otori,  Japanese  Minister  at  Seoul,  22. 

Ou,  Hung  Tiyong,  Korean  Progressive 
leader,  12. 

Oyama,  General,  Japanese  commander- 
in-chief  of  Second  Army  Corps,  25. 

Panic:  financial,  83,  174;  of  1899  and 
1901,  159,  283. 

Paper  money  in  circulation  (1893- 
1899),  171. 

Payment  plan  of  war  bonds,  65,  67-8. 

Peking,  9,  15;  proposed  attack  upon,  32. 

Pescadores,  occupation  of,  31-2;  ceded 
to  Japan,  33,  229. 

Phung  Island,  battle  at,  19,  21-2,  49. 

Ping-yang,  campaign  of,  21  et  seq. 

Population:  of  towns  and  villages,  300- 
1.  (1893-1903),  318-9;  increase  of 
(1887-1905)  in  annual  percentages, 
322. 

Port  Arthur:  25,  27;  leased  to  Russia,  7, 
34,  320;  attack  upon,  28-9. 

Prices:  rise  of,  81  et  seq.,  153,  158,  161, 
273;  of  tobacco,  136;  of  commodities 
(1873-1912),  279-80,  284  et  seq.;  of 
labor  and  commodities  in  Tokyo  and 
Osaka  (1893-1910),  282,  292;  com- 
parison of,  of  commodities  with  cur- 
rency in  circulation  (1887-191 1),  289, 
311;  of  labor  in  Tokyo  (1893-1903), 
293-4,  312-3;  fluctuation  of,  of  labor 


and  commodities  (1893-1903J,  294; 
wholesale,  in  Tokyo  (1893-1903),  303 
et  seq.;  in  Osaka,  310;  of  labor,  in 
Osaka  (1893-1903),  314-5;  of  neces- 
saries in  Tokyo  (1 893-1 903),  316;  of 
commodities  in  annual  percentages 
(1887-1905),  322. 
Progressive  party,  of  Korea,  12,  14. 

Railways:  construction  and  improve- 
ment of,  89,  94,  96,  103,  (1893-1903), 
145,  255-6,  258  et  seq.;  expenditures 
for  new  construction  of,  105-6;  con- 
struction of,  in  Formosa,  1 1 1 ,  261 ;  vol- 
ume of  goods  transported  by  (1893- 
1903),  227;  capital  invested  in  (1896- 
1 903) ,  257 ;  extension  of  private  ( 1 893- 
1903),  261 ;  passenger,  freight,  income 
etc.  of  government  (1893-1903),  265, 
of  private  (1893-1903),  267,  of  For- 
mosan  (1897-1903),  269;  revenue, 
disbursements  and  profits  of  govern- 
ment ( 1 893-1 903),  266,  of  private 
(1893-1903),  268. 

Receipts:  monthly  government  (1S74- 
1876),  59;  from  war  loans,  63,   72, 

U3-4- 

Redemption:  of  war  loans,  64,  66,  68, 
75  et  seq.,  89,  113;  Chinese  indemnity 
used  for,  of  war  expenses,  121 ;  of  na- 
tional bank  notes,  162,  167;  of  gov- 
ernment notes  and  bank  notes,  189 
et  seq. 

Regulations  for  issue  of  war  loans,  64 
et  seq. 

Revenue:  budget  of,  for  war  purposes, 
47-8,  (1894-1896),  56,  (1893-1903), 
87-8;  monthly,  for  war  purposes,  52- 
3;  from  occupied  territory,  55;  for  ex- 
penditures for  war,  58;  for  expendi- 
tures after  1896,  90;  for  post-bellum 
enterprises  (1896-1903),  92;  increase 
of,  94;  ten  year  plan  for  (1 896-1 905), 
95;  from  telegraph  system,  131-2, 
137;  from  tobacco  monopoly,  132, 
137;  expansion  of,  of  local  communi- 
ties (1893-1903),  142;  excess  of, 
over  expenditures  (1 893-1903),  143; 
of  government  railways  (1 893-1 903), 
266;  of  private  railways  (1 893-1 903), 
268;  from  customs  duties,  291. 

Rewards,  for  war  fund  contributors,  43. 

Rice:  area  under  cultivation  (1893- 
1903),  275;  average  price  of  (1893- 
1903),  281. 

Rintsushin,  23. 

Russia:  Port  Arthur  leased  to,  7,  320; 
interference  of,  in  Liaotung  Penin- 
sula, 33-4. 

Ryuzan,  23. 


INDEX 


329 


Sake,  tax  on,  90,  126,  129,  289. 
Sanitation,    expenditures    for     (1893- 

1903),  151- 
Sasebo,  31. 

Scrip,  war,  issued,  55  et  seq. 
Seoul:    10;   Japanese   legation   at,    11; 

Treaty  of,  15. 
Shanghai,  steamship  service  from,  108. 
Shanhaikwan,  capture  of,  32. 
Shantung:  30;  fighting  in,  35. 
Shashih,  opened  to  commerce,  33,  232. 
Shimonoseki:  10;  Treaty  of,  33,  35,  109, 

118;  telephone  extension  in,  264. 
Shiojiri,  105. 
Miipbuilding:  subsidies  for,  84,  89,  109, 

254,    262;    increase   in,    210,    (1893- 

1903),  256. 
Sino-French  War,  7. 
Sinonoi,  105. 
Soejima,  Count,  9;  Japanese  envoy  to 

Formosa,  1 1. 
Songhwan,  battle  of,  19,  22,  49. 
Soochow,  opened  to  commerce,  33,  232. 
Soshojo,  22. 
^o-himori,  8. 
Specie:    prevention    of   diminution   of, 

56-7;  effect  of  war  on  reserve,  155; 

decrease  of  reserve,  171. 
"Spheres  of  Influence",  321. 
Steamship   lines:    107-8;   subsidies  to, 

108-9,  203;  statistics  of,  270  el  seq. 
Stock  exchange,  effect  of  currency  re- 
form on,  165. 
Subsidies:  for  shipbuilding,  84,  89,  109, 

254,   262;   to   banks,   103,   107,    120, 

( 1 897-1 903),    179,    182;    to    Waka- 

matsu  Harbor  Construction  Co.,  104; 

to  steamship  companies,  108-9,  263. 
Sugar,  imported  from  Formosa,  229. 
Sujin,  Kmprror,  expedition  of,  to  Korea, 

8. 
Susano-no-Mikoto,  8. 

Tai-Wonkun,  9. 

Takezoe,  Shinichiro,  Japanese  Minister 
to  Korea,  14. 

Takushan,  27. 

Taiko,  Hideyoshi,  expedition  of,  to 
Korea,  8. 

Tamushan,  naval  battle  at,  24. 

Taohotsuon,  battle  at,  27. 

Tariff  rates,  233-4,  29°- 

Tatungkow,  capture  of,  27. 

Taxes:  in<  rease  of,  81  et  sea.,  90,  126  et 
seq.,  280,  289  et  srq.;  readjustment  of, 
<).s:  income  from,  127;  to  defray  ex- 
penditures of  Boxer  Rebellion,  132- 
3;  business,  228;  comparison  of,  with 
wages  and  cost  of  living  ( 1  S<).>— 
1903),  299;  levied  (1893-1903),  317; 


iue  from,  in  annual  percentages 
(1887-1905),  322. 

Teijosho,  13. 

Telegraph,  revenue  from,  131-2,  137. 

Telephone  Bystem,  extension  of,  89,  94, 
103,  106-7,  255.  264. 

Tienchwangtai,  capture  of,  30-1. 

Tientsin:  14;  Treaty  of,  5,  15,  17, 
steamship  service  from,  1 

Tobacco:  establishment  of,  monopoly, 
90,  126;  workings  of,  monopoly,  134 
el  seq.;  revenue  and  profit  from,  132, 
(1898-1903),  136-7;  advances  in  man- 
ufacture of,  210;  rise  in  price  of,  2-1  ; 
tax  on,  290. 

Togakuto  Affair,  6. 

Tokyo:  11,  124;  interest  rates  in.  I 

extension  of  telephone  service  in,  106; 
prices  of  commodities  and  wages  in 
(1893-1903),  2X2-3,  292;  price  of  la- 
bor in  (1873-1910),  293,  ( 1 893-1 903), 
294,  312-3;  wholesale  prices  in  (1893- 
1903),  303  et  seq.;  prices  of  necessaries 
in  (1893-1910),  316. 

Tong  Haks,  revolutionary  movement 
of,  17-8. 

Torpedo  boats:  number  used  during 
war,  35;  use  of  indemnity  funds  for 
constructing,  97. 

Toyama,  105. 

Trade:  with  Korea,  9,  12,  154.  2 

pansion  of  foreign,  89,  1 58.  230  <  /  seq.; 
decrease  of  foreign,  168;  foreign 
(1893-1895),  225,  (1893-1903).  239. 
(1868-1903),  244  et  seq.:  between 
Japan  and  Formosa  (1897-190; 

Transportation:  progress  in,  254  <•/  seq.; 
capital  invested  in  (1896   i<><\ 

Treasury  Office,  expenditures  for 
(1894-1903),  36,  (1894-1897),  43,  45. 

Treaties:  of  Tientsin,  5.  '5.  17:  "'  '876 
(Korea),  10  et  seq.;  with  western 
Towers.  12:  of  Chemulpo     [882  .  1 .;  - 

4;  of  Seoul,  15;  of  Shimorioseki 
(1895',  33,  35;  commercial,  254. 

Tsuboi,  Rear  Admiral,  21. 

Tsunp,  Tai.  Emperor,  B. 

Tsuruga,  105, 

Ujina,  23,  32. 

United  States:  <  binese  treaty  with,  12; 

monetary  system  in,  [62;tarifl 

ment  with,  233. 

Vladivostok,  Bteamship  line  from,  [08. 

rise  in,  ss:  of  factory  workers 
compared  with,  of  independent  work- 
ers   (1 899-1 903'.    225:    of    factory 


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